OCTOPUS ECLIPSE VCT PLC

Transcription

1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt about the action to be taken, you should immediately consult your bank manager, stockbroker, solicitor, accountant or other independent financial adviser authorised pursuant to the Financial Services and Markets Act 2000 (FSMA). If you have sold or otherwise transferred all of your Shares in Octopus Eclipse VCT plc (the Company), please send this document and accompanying documents, as soon as possible, to the purchaser or transferee or to the stockbroker, independent financial adviser or other person through whom the sale or transfer was effected for delivery to the purchaser or transferee. This document, which comprises a prospectus relating to the Company dated 28 September 2012, has been prepared in accordance with the prospectus rules made under Part VI of FSMA. The Company, the Directors and the Proposed Directors, whose names appear on pages 36 and 37 of this document, accept responsibility for the information contained herein. To the best of the knowledge and belief of the Company, the Directors and the Proposed Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. Matrix Corporate Capital LLP, which is authorised and regulated in the United Kingdom by the FSA, is acting as sponsor for the Company and no-one else and will not be responsible to any other person for providing the protections afforded to customers of Matrix Corporate Capital LLP (subject to the responsibilities and liabilities imposed by FSMA and the regulatory regime established thereunder) in providing advice or in relation to any matters referred to in this document. SGH Martineau LLP, which is regulated in the United Kingdom by the Solicitors Regulation Authority, is acting as legal adviser to the Company, Octopus Eclipse VCT 2 plc (Eclipse 2), Octopus Eclipse VCT 3 plc (Eclipse 3) and Octopus Eclipse VCT 4 plc (Eclipse 4) (Eclipse 2, Eclipse 3 and Eclipse 4, together the Target VCTs) and no-one else and will not be responsible to any other person for providing advice in connection with any matters referred to in this document. A1: 1.1 A1: 2.1 A3: 1.1 A3: 1.2 A3: 10.1 OCTOPUS ECLIPSE VCT PLC (Registered in England and Wales with registered number ) Prospectus A1: A1: A1: Relating to the issue of up to 170 million New Shares in connection with:. the acquisition of the assets and liabilities of Eclipse 2, Eclipse 3 and Eclipse 4; and. an enhanced buyback facility A3: 6.1 A3: 6.2 The existing Shares issued by the Company are listed on the premium segment of the Official List of the UKLA and traded on the London Stock Exchange s main market for listed securities. Application has also been made to the UKLA for the New Shares to be listed on the premium segment of the Official List and will also be made to the London Stock Exchange for such New Shares to be admitted to trading on its main market for listed securities. It is expected that such admission will become effective and that trading in the New Shares will commence within three business days of the allotment of such New Shares. The New Shares will rank pari passu with the existing issued Shares from the date of issue. The attention of shareholders of the Company and the Target VCTs and new investors who are resident in, or citizens of, territories outside the United Kingdom is drawn to the information under the heading Overseas Shareholders in paragraph 5 of Part XI of this document. The distribution of this document in jurisdictions other than the UK may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any of these restrictions. Any failure to comply with any of those restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, the New Shares to be issued pursuant to the Schemes and the Enhanced Buyback Facility have not and will not be registered under the United States Securities Act 1933 or the United States Investment Company Act Persons receiving this document should carefully consider the risk factors on pages 11 and 12 of this document. 1

2 CONTENTS SUMMARY 3 RISK FACTORS 11 EXPECTED TIMETABLES 13 DEFINITIONS 17 PART I MERGER OF THE COMPANY AND THE TARGET VCTS 22 PART II THE SCHEMES 25 PART III THE ENHANCED BUYBACK FACILITY 31 PART IV INFORMATION ON THE COMPANY 36 PART V THE INVESTMENT MANAGER 43 PART VI FINANCIAL INFORMATION ON THE COMPANY AND THE TARGET VCTS 45 PART VII PRO FORMA FINANCIAL INFORMATION 49 PART VIII INVESTMENT PORTFOLIOS AND PRINCIPAL INVESTMENTS OF THE COMPANY AND THE TARGET VCTS 52 PART IX TAX POSITION OF SHAREHOLDERS 59 PART X TAX POSITION OF THE COMPANY 63 PART XI ADDITIONAL INFORMATION 65 PART XII ENHANCED BUYBACK FACILITY APPLICATION PROCEDURES AND TERMS AND CONDITIONS 88 ENHANCED BUYBACK FACILITY APPLICATION FORM CORPORATE INFORMATION 99 2

3 SUMMARY Summaries are made up of disclosure requirements known as Elements. These Elements are numbered in Sections A to E. This summary contains all of the Elements required to be included in a summary for the type of shares being issued pursuant to this Prospectus and the Company being a closed-ended investment fund. Some of the Elements are not required to be addressed and, as a result, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in this summary, it is possible that no relevant information can be given regarding that Element. In these instances, a short description of the Element is included, together with an appropriate Not applicable statement. A B B1 B2 Legal and commercial name Domicile / Legal form / Legislation / Country of incorporation Introduction and Warnings This summary should be read as an introduction to this Prospectus. Any decision to invest in the securities of the Company should be based on consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in this Prospectus is brought before a court, the plaintiff investor might, under the national legislation of Member States, have to bear the costs of translating this Prospectus before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled this summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities. Issuer Octopus Eclipse VCT plc ( the Company ). The Company is a public limited liability company which is registered in England and Wales with registered number The principal legislation under which the Company operates is CA 2006 (and regulations made thereunder). B5 Group description Not applicable. The Company is not part of a group. B6 Material Shareholders / Differing voting rights / Control The Company does not have any material shareholders with different voting rights. All Shareholders have the same voting rights in respect of the existing share capital of the Company. As at 27 September 2012 (this being the latest practicable date prior to publication of this document), the Company is not aware of any person who, directly or indirectly, has or will have an interest in the capital of the Company or voting rights which is notifiable under UK law (under which, pursuant to CA 2006 and the Listing Rules and Disclosure and Transparency Rules of the FSA, a holding of 3% or more will be notified to the Company). A22: A1 A22 B33: B1 A22 B33: B2 A22 B33: B6 3

4 B7 Selected financial information and statement of any significant changes Certain selected historical information of the Company is set out below: Total profit/ (loss) on ordinary actitivities before taxation ( 000s) Total net asset value return per Share (p) Dividends paid per Share (p) Net assets ( 000s) NAV per Share (p) Unaudited six months to 31 January 2012 Audited year ended 31 July 2011 Audited year ended 31 July 2010 Audited 14 month period ended 31 July 2009 (1,804) (1,149) 1,801 (3,798) (5.7) (3.5) 5.7 (11.6) ,968 21,351 25,115 25, B8 Key pro forma financial information The Company s net asset value per Share has fallen from 80.7p as at 31 July 2009 to 56.8p as at 31 January 2012 and dividends of 26.0p in aggregate were paid per Share between 1 December 2008 and 31 January As at 31 July 2012, the Company s net asset value per Share (unaudited) was 49.4p. The Enlarged Company is expected to have net assets of approximately 43 million (assuming the proposed merger is completed based on the NAVs of the Companies as at 31 January 2012 (in respect of the Company, Eclipse 3 and Eclipse 4) and 31 July 2012 (in respect of Eclipse 2), adjusted for the payment of the Special Dividends, and after deducting the expenses of the Schemes and the Enhanced Buyback Facility. This pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and, therefore, does not represent the Company s actual financial position or results. B9 Profit forecast Not applicable. There are no profit forecasts in the Prospectus. B10 B11 B34 Qualifications in the audit report Insufficient working capital Investment objective and policy, including investment restrictions Not applicable. There were no qualifications in the audit reports for the three years ended 31 July 2009, 2010 and Not applicable. The Company is of the opinion that its working capital is sufficient for its present requirements, that is for at least the twelve month period from the date of this document The investment objective of the Company is to invest in a broad range of AIM-quoted and UK smaller companies which meet the relevant criteria for VCTs in order to generate income and capital growth over the long-term. A22: B33 B9, B10, B11 A22: B34 4

5 The Company s investment policy has been designed to enable the Company to comply with the VCT qualifying conditions. It is intended that the long-term disposition of the Company s assets will be not less than 80% in a portfolio of unquoted investments and up to 20% in cash or near-cash investments to provide a reserve of liquidity which will maximise the Company s flexibility as to the timing of investment acquisitions and disposals, dividend payments and share buybacks. Investments will be structured using various unquoted investment instruments, including ordinary and preference shares, loan stocks and convertible securities, to achieve an appropriate balance of income and capital growth, having regard to the VCT legislation. The portfolio will be diversified by investing in a broad range of industry sectors and by holding investments in companies at various stages of maturity in the corporate development cycle. The normal investment holding period will be in the range from three to seven years. Any uninvested funds will typically be held in cash and money market funds. The Company is subject to the investment restrictions relating to a venture capital trust in ITA 2007 and in the Listing Rules which specify that (i) the Company must, at all times, invest and manage its assets in a way which is consistent with its object of spreading investment risk and in accordance with its published investment policy; (ii) the Company must not conduct any trading activity which is significant in the context of its group as a whole; and (iii) the Company may not invest more than 10%, in aggregate, of the value of the total assets of the issuer at the time an investment is made in other listed closedended investment funds. B35 Borrowing limits The Articles restrict borrowings to 50% of the adjusted capital and reserves as defined therein; the current policy however is that investments will normally be made using the shareholders funds and it is not intended that the Company will take on any long-term borrowings. As at the date of this document the Company has no borrowings. B36 Regulatory status The Company is subject to the provisions of the Companies Act 2006 and UK law generally, its Shares are listed on the premium segment of the Official List and, as a qualifying VCT, it is subject to regulation by HMRC in order to retain such a status. B37 Typical investor The typical investor for whom investment in the Company is designed is an individual retail investor aged 18 or over who is resident and a tax payer in the UK. B38 Investments of 20% or more in a single company B39 Investments of 40% or more in a single company Not applicable. The Company does not have any investments which represent more than 20% of its gross assets in a single company or group. Not applicable. The Company does not have any investments which represent more than 40% of its gross assets in a single company or group. B40 Service providers Octopus receives an annual investment management fee of an amount equal to 2% of the net assets of the Company and an annual administration fee equal to 0.3% of the net assets of the Company (in each case, plus applicable VAT). These fee arrangements will continue to apply to the Enlarged Company, but will be across the enlarged net assets. A15: 2.1 5

6 B41 B42 B43 B44 Regulatory status of Octopus Calculation of net asset value Umbrella collective investment scheme Absence of financial statements Octopus is also entitled to performance related incentive fees once distributions in respect of each Share issued pursuant to the original launch prospectus issued by the Company and remaining in issue since launch have reached 45p in aggregate. Octopus will then be paid an amount (per Share in issue on a Payment Date) equal to 20% of the Increase in Value on the relevant Payment Date, subject to the Total Return exceeding the Hurdle Value on that Payment Date. For these purposes:. Payment Date means the date on which the Company publishes audited accounts in the years 2007 to 2015;. Total Return means the NAV per Share as at the Payment Date plus dividends paid or declared per Share in issue from launch;. Hurdle Value means the Total Return on the date Shares were first issued, increased by simple interest at an annual rate of 7% to the relevant Payment Date; and. Increase in Value means the amount by which the Total Return exceeds (i) the Total Return on the date Shares were first issued in respect of the Payment Date and (ii) thereafter, the Total Return on the Payment Date when the Hurdle Value was last exceeded. The Board and Octopus have agreed that, subject to one or more of the Schemes becoming effective, the performance related incentive fee arrangement will be terminated. The Board will consider implementing a new performance related incentive fee arrangement with Octopus once the overall assets of the Enlarged Company have improved Octopus is the investment manager of the Company and also provides administration, secretarial and custodian services. Octopus is registered in England and Wales as a private limited company under number Octopus is authorised and regulated by the Financial Services Authority, with registered number The Company s net asset value is calculated at every quarter and published on an appropriate regulatory information service. If for any reason valuations are suspended, shareholders will be notified in a similar manner. Not applicable. The Company is not part of an umbrella collective investment scheme. Not applicable. The Company has commenced operations and published financial statements B45 Investment portfolio The Company invests in a diversified portfolio of AIM-quoted and UK smaller companies in order to generate income and capital growth over the long-term. The investment focus will be on the provision of growth and development capital to companies which are profitable or on a clear path to profitability. A summary of the Company s portfolio is set out below: A22: B41 A22: B42 A22: B43 A22: B44 A22: B45 Date of launch Funds raised since launch ( m) Unaudited net assets* ( m) NAV per share (p)* Number of venture capital investments* Carry value of the venture capital investments ( m)* April *Taken from the unaudited management accounts to 31 July 2012 for the Company. 6

7 B46 C C1 Most recent net asset value per Share Description and class of securities As at 31 July 2012, the unaudited NAV per Share was 49.4p. Securities The securities being offered pursuant to the proposed merger and the Enhanced Buyback Facility are ordinary shares of 10p each ( New Shares ) (ISIN: GB00B00MKB60). C2 Currency The Company s share capital comprises ordinary shares of 10p each. C3 Shares in issue 32,091,513 ordinary shares of 10p each are in issue at the date of this document (all fully paid up). The maximum number of New Shares to be issued pursuant to the proposed merger and the Enhanced Buyback Facility is 170 million. C4 C5 Description of the rights attaching to the securities Restrictions on transfer The New Shares will rank equally in all respects with each other and with the existing Shares. The New Shares will be listed on the premium segment of the Official List and will be freely transferable. C6 Admission Application has been made to the UK Listing Authority for the New Shares to be listed on the Official List and will be made to the London Stock Exchange for such shares to be admitted to trading on its main market for listed securities. It is anticipated that dealings in the New Shares will commence within three business days following allotment. C7 Dividend policy The dividend policy of the Company is to maintain a regular dividend flow where possible in order to take advantage of the tax free distributions a VCT is able to provide. The Company has paid an average annual dividend of 9.7p per Share over the last three years (ignoring the Special Dividend). D D1 Key information on the risks specific to the Company or its industry The Board intends to target annual dividends of 5% of NAV, plus further special distributions when realisations permit, following the proposed merger (subject to available cash, portfolio requirements, distributable reserves and applicable law at the relevant time). Risks Company. There is no guarantee that the Enlarged Company will meet its objectives. The value of Shares can fluctuate and Shareholders may not get back the amount they invested, and there is no guarantee that dividends will be paid. The past performance of the Company, the Target VCTs and/or Octopus is no indication of future performance.. Although the existing Shares are (and the New Shares to be issued will be) admitted to the premium segment of the Official List and are traded on the London Stock Exchange s market for listed securities, the secondary market for VCT shares is generally illiquid and Shareholders may find it difficult to realise their investment. An investment in the Company should, therefore, be considered as a long-term investment.. Whilst it is the intention of the Board that the Company will continue to be managed so as to qualify as a VCT, there can be no guarantee that such status will be maintained, which may result in adverse tax consequences. A22: B46 A22: C1 A22: C2 A22: C4 A22: C5 A22: C6 A22: B33: C7 A22: D2 7

8 . The tax rules, or their interpretation, in relation to an investment in the Company and/or the rates of tax may change during the life of the Company and may apply retrospectively which could affect tax reliefs obtained by Shareholders and the VCT status of the Company.. Investment in unquoted companies, by its nature, involves a higher degree of risk than investment in companies listed on the Official List which could result in the value of such investment, and interest income and dividends therefrom reducing.. The Company s investments may be difficult, and take time, to realise. There may also be constraints imposed on the realisation of investments in order to maintain the VCT tax status of the Enlarged Company which may restrict the Enlarged Company s ability to obtain maximum value from its investments. D3 Key information on the risks specific to the securities Merger. Completion of any one Scheme is dependent upon a number of conditions precedent being fulfilled, including the approval of Shareholders. Whilst the Board has identified a number of potential benefits for the Enlarged Company, there is no certainty that these benefits will lead to improved prospects for the Enlarged Company. If one or more of the Schemes are not approved and effected, the full benefits of the Enlarged Company may not be realised. A22: D3. Shareholders may be adversely affected by the performance of the investments, whether acquired from the Target VCTs or made by the Company.. Shareholders may be adversely affected by a change in the VCT status of the Company if a number of the investments acquired from Target VCTs, or the investments of the Company, are, or become, unable to meet VCT requirements. Enhanced Buyback Facility. Implementation of the Enhanced Buyback Facility is conditional on approval of Resolutions 5 and 10. The Enhanced Buyback Facility will be withdrawn if the requisite Resolutions are not approved.. Participation in the Enhanced Buyback Facility in respect of Existing Shares which have not been held for five years will be subject to clawback by HMRC of any upfront income tax reliefs obtained on original subscription.. In addition, there could be an income tax charge for Shareholders on any excess of the Tender Price above the original issue price for the Existing Shares that are bought back. Shareholders whose Existing Shares do not qualify for VCT reliefs may also be subject to a capital gains tax charge. E Offer A22: E1 E1 Merger net proceeds and expenses If effected, the merger will result in an Enlarged Company with total net assets of approximately 40 million (after expected merger costs of approximately 387,500 and adjusting for the payment of the Special Dividends). The proposed merger will not, however, result in any proceeds actually being raised by the Company. 8

9 Enhanced Buyback Facility net proceeds and expenses The Enhanced Buyback Facility is not expected to have a material effect on the net assets of the Company as the Shares are repurchased and issued at equivalent prices (less costs amounting to 5% of the cost of Shares repurchased and any annual trail commission). The Enhanced Buyback Facility will not, however, result in any proceeds actually being raised by the Company. The Company is responsible for any annual trail commission payable as a result of the Enhanced Buyback Facility. A22: E1 E2a Reasons for the merger The Board considers that the proposed merger will bring a number of benefits to all of the groups of shareholders through: A22: E2a. a reduction in annual running costs for the Enlarged Company compared to the aggregate annual running costs of the separate companies;. the creation of a single VCT with a greater capital base over which to spread annual running costs;. a greater focus to the objective of improving the investment performance;. participation in a larger VCT with a more diversified portfolio, spreading the risk across a broader range of investments;. increasing the ability to support follow-on investments and new investments; and. the potential to enhance the ability to pay dividends and buy back shares in the future, as well as improve liquidity in the secondary market, as it is hoped that a larger vehicle will attract increased interest. Reasons for the Enhanced Buyback Facility The Enhanced Buyback Facility is an arrangement by which Shareholders can sell existing Shares in the Company and reinvest the proceeds in New Shares in the Company, on which upfront tax relief may then be available. A22: E2a E3 Terms and conditions of the merger The merger, the implementation of which is conditional on, inter alia, the passing of resolutions at the General Meeting will be effected as follows: A22: E3. each Target VCT will be placed into members voluntary liquidation pursuant to a scheme of reconstruction under Section 110 IA 1986; and. all of the assets and liabilities of each Target VCT will be transferred to the Company in consideration for the issue of New Shares (which will be issued directly from the Company to the shareholders of the relevant Target VCT). Illustrative merger example based on the net assets of the Companies as at 31 July 2012 (which includes an adjustment for the Special Dividends). Unaudited NAV (p) Roll-Over Values / Company Merger Value (p) New Shares for every share held Shares Eclipse 2 Shares Eclipse 3 Shares Eclipse 4 Shares

10 Terms and conditions of the Enhanced Buyback Facility A summary of the terms of the Enhanced Buyback Facility, the implementation of which is conditional on, inter alia, the passing of resolutions at the General Meeting, are as follows: A22: E3. The Company is making a tender offer to all UK Shareholders on the register on 1 November 2012 to purchase up to 50% of the issued share capital as at that date.. Implementation of the Enhanced Buyback Facility is conditional on the approval by Shareholders of certain resolutions to be proposed at the General Meeting. The Enhanced Buyback Facility will only be implemented to the extent the Company has sufficient distributable reserves (although the Board expects the Company to be able to implement the Enhanced Buyback Facility in full).. Shareholders eligible to participate may tender some or all of their Existing Shares (subject to the above).. The purchase will be subject to the participating Shareholder agreeing to reinvest all of the proceeds of sale in the purchase of New Shares.. The purchase will be completed at a price equal to the most recently published net asset value per Share at the time of purchase.. The reinvestment will be completed at a price equal to the most recently published net asset value per Share at the time of allotment, divided by E4 Description of any interest that is material to the issue Not applicable. There are no interests that are material to the issue. A22: E4 E5 Name of persons selling securities Not applicable. No entity is selling securities in the Company. A22: E5 E6 Amount and percentage of dilution If 170 million New Shares are issued in aggregate under the proposed merger and the Enhanced Buyback Facility, the existing 32,091,513 Shares would represent 15.9% of the enlarged issued share capital. E7 Expenses charged to the investor Not applicable. No expenses are charged to the investor by the Company. 10

11 RISK FACTORS A1: 4 A3: 2 Shareholders and prospective Shareholders should consider carefully the following risk factors in addition to the other information presented in this document. If any of the risks described below were to occur, it could have a material effect on the Company s business, financial condition or results of operations. The risks and uncertainties described below (such as changes in legal, regulatory or tax requirements) are not the only ones the Company or Shareholders will face. Additional risks not currently known to the Company or the Board, or that the Company or the Board currently believe are not material, may also adversely affect the Company s business, financial condition or results of operations. The value of the Shares could decline due to any of the risk factors described below and Shareholders could lose part or all of their investment. Shareholders and prospective Shareholders should consult an independent financial adviser authorised under FSMA. References to the Company should be taken as including the Enlarged Company. Merger Related Risk Factors Completion of the Schemes is dependent upon a number of conditions precedent being fulfilled, including the approval of Shareholders. Whilst the Board has identified a number of potential benefits for the Enlarged Company, there is no certainty that these benefits will lead to improved prospects for the Enlarged Company. If one or more of the Schemes are not approved and effected, the full benefits of the Enlarged Company may not be realised. Each Scheme is not conditional on the other Schemes being approved and the conditions precedent for the other Schemes being fulfilled. A Scheme will proceed independently and irrespective of the other Schemes. Shareholders may be adversely affected by the performance of the investments, whether acquired from a Target VCT or made by the Company. The performance of the investments acquired from a Target VCT (as well as the investments of the Company) may restrict the ability of the Company following implementation of one or more of the Schemes to distribute any capital gains and revenue received on the investments transferred from a Target VCT to the Company (as well as the investments of the Company). Any gains (or losses) made on the investments of the Company will, following implementation of one or more of the Schemes, be shared amongst all the Shareholders pro rata to the number of Shares of that class then in issue. Shareholders may be adversely affected by a change in the VCT status of the Company if a number of the investments acquired from a Target VCT or the investments of the Company are, or become, unable to meet VCT requirements. Risks applicable to the Enhanced Buyback Facility The Enhanced Buyback Facility is conditional on approval of Resolutions 5 and 11 to be proposed at the General Meeting. If the requisite Resolutions are not approved, the Enhanced Buyback Facility will be withdrawn. The Enhanced Buyback Facility will only be implemented to the extent the Company has sufficient distributable reserves (although the Board expects the Company to be able to implement the Enhanced Buyback Facility in full). The Enhanced Buyback Facility is not, however, conditional on the proposed merger. Shareholders should note that participation in the Enhanced Buyback Facility will be considered, for tax purposes, as a disposal of the Existing Shares. Participation in the Enhanced Buyback Facility in respect of Existing Shares which have not been held for five years will, therefore, be subject to clawback by HMRC of any upfront income tax reliefs obtained on original subscription. In addition, there could be an income tax charge for Shareholders on any excess of the Tender Price above the original issue price for the Existing Shares that are bought back. Shareholders whose Existing Shares do not qualify for VCT reliefs may also be a subject to a capital gains tax charge. Company Risk Factors The value of Shares, and the income from them, can fluctuate and Shareholders may not get back the amount they invested when sold. In addition, there is no certainty that the market price of Shares in the Company will fully reflect their underlying NAV nor that any dividends will be paid. Shareholders in the Company should not rely upon any share buyback policy to offer any certainty of selling their Shares at prices that reflect the underlying NAV. There is no guarantee that the Company will meet its objectives. The past performance of the Company, the Target VCTs and/or Octopus is no indication of future performance of the Company. The return 11

12 received by Shareholders will be dependent on the performance of the underlying investments. The value of such investments, and interest income and dividends therefrom, may rise or fall and Shareholders may not get back the full amount invested. The existing Shares have been (and it is anticipated that the New Shares to be issued will be) admitted to the premium segment of the Official List and are (or will be) traded on the London Stock Exchange s market for listed securities. However, the secondary market for VCT shares is generally illiquid (which may be partly attributable to the fact that initial tax reliefs are not available for VCT shares bought in the secondary market and because VCT shares usually trade at a discount to NAV) and Shareholders may find it difficult to realise their investment. An investment in the Company should, therefore, be considered as a long-term investment. Whilst it is the intention of the Board that the Company will continue to be managed so as to qualify as a VCT, there can be no guarantee that such status will be maintained. Failure to continue to meet the qualifying requirements could result in Shareholders losing the tax reliefs available for VCT shares, resulting in adverse tax consequences including, if the holding has not been held for the relevant holding period, a requirement to repay the tax reliefs obtained. Furthermore, should the Company lose its VCT status, dividends and gains arising on the disposal of Shares would become subject to tax and the Company would also lose its exemption from corporation tax on its capital gains. The tax rules, or their interpretation, in relation to an investment in the Company and/or the rates of tax may change during the life of the Company and may apply retrospectively which may affect tax reliefs obtained by Shareholders and the VCT status of the Company. Changes in legislation concerning VCTs in relation to what constitutes qualifying holdings and qualifying trades may limit the number of qualifying investment opportunities, reduce the level of returns which might otherwise be achievable or result in the Company not being able to meet its objectives. If a Shareholder disposes of his or her Shares within five years of issue, he or she will be subject to clawback by HMRC of any income tax reliefs originally claimed. For these purposes, the date of issue of the New Shares in the Enlarged Company issued pursuant to the Schemes will be the original date of issue of the relevant Target VCT s shares in respect of which such New Shares in the Enlarged Company are issued. Any realised losses on the disposal of Shares cannot be used to create an allowable loss for capital gains tax purposes. Investment in unquoted companies (including AIM-traded and PLUS market-traded companies), by its nature, involves a higher degree of risk than investment in companies listed on the Official List, which could result in the value of such investment, and interest income and dividends therefrom, reducing. In particular, small companies often have limited product lines, markets or financial resources and may be dependent for their management on a small number of key individuals and may be more susceptible to political, exchange rate, taxation and other regulatory changes and may not produce the hoped-for returns. In addition, the market for securities in smaller companies is less regulated and is usually less liquid than that for securities in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such securities. Full information for determining their value or the risks to which they are exposed may also not be available. Investment returns will, therefore, be uncertain and involve a higher degree of risk than investment in a company listed on the Official List. Realisation of investments in unquoted companies may be difficult and may take considerable time. There may also be constraints imposed on the realisation of investments in order to maintain the VCT tax status of the Company which may restrict the Company s ability to obtain maximum value from its investments. In addition, although the Company may receive customary venture capital rights in connection with some of its unquoted investments, as a minority investor it may not be in a position to fully protect its interests. 12

13 EXPECTED TIMETABLES EXPECTED TIMETABLE FOR THE COMPANY Schemes Latest time for receipt of forms of proxy for the General Meeting 2.00 p.m. on 21 October 2012 General Meeting 2.00 p.m. on 23 October 2012 Calculation Date after 5.00 p.m. on 30 October 2012 Effective Date for the transfer of the assets and liabilities of the Target VCTs to the Company and the issue of New Shares pursuant to the Schemes* 31 October 2012 Announcement of the results of the Schemes 31 October 2012 Dealings in Shares to take place ex the Special Dividend Admission of and dealings in New Shares issued pursuant to the Schemes to commence CREST accounts credited with New Shares issued pursuant to the Schemes Certificates for New Shares issued pursuant to the Schemes dispatched 1 November November November November 2012 Payment of the Special Dividend 16 November 2012 Enhanced Buyback Facility Enhanced Buyback Facility Record Date 5.00 p.m. on 1 November 2012 Enhanced Buyback Facility opens 2 November 2012 Enhanced Buyback Facility closes noon on 28 December 2012 Purchase of existing Shares and issue of New Shares pursuant to the Enhanced Buyback Facility Announcement of the results of the Enhanced Buyback Facility Admission of and dealings in New Shares issued pursuant to the Enhanced Buyback Facility commence Certificates for New Shares issued pursuant to the Enhanced Buyback Facility dispatched 14 January January January January 2013 A3: 5.10 A3: 4.7 A3: A3: A3: A3: 4.7 A3: (The Directors reserve the right to amend or extend these dates at their discretion.) 13

14 EXPECTED TIMETABLE FOR ECLIPSE 2 Date from which it is advised that dealings in Eclipse 2 Shares should only be for cash settlement and immediate delivery of documents of title Latest time for receipt of forms of proxy for the Eclipse 2 First General Meeting 12 October p.m. on 21 October 2012 Eclipse 2 First General Meeting 2.30 p.m. on 23 October 2012 Latest time for receipt of forms of proxy for the Eclipse 2 Second General Meeting 1.00 p.m. on 29 October 2012 Eclipse 2 register of members closed 30 October 2012 Record Date for Eclipse 2 Shareholders entitlements 5.00 p.m. on 30 October 2012 Calculation Date after 5.00 p.m. on 30 October 2012 Dealings in Eclipse 2 Shares suspended 7.30 a.m. on 31 October 2012 Eclipse 2 Second General Meeting 1.00 p.m. on 31 October 2012 Effective Date for the transfer of the assets and liabilities of Eclipse 2 to the Company and the issue of New Shares pursuant to the Eclipse 2 Scheme Announcement of the results of the Eclipse 2 Scheme 31 October October 2012 Payment of the Eclipse 2 Special Dividend 16 November 2012 Cancellation of the Eclipse 2 Shares listing 8.00 a.m. on 29 November 2012 (The last trading date for the Eclipse 2 Shares will be 30 October See the timetable for the Company with regard to admission, CREST accounts being credited and certificates being dispatched.) 14

15 EXPECTED TIMETABLE FOR ECLIPSE 3 Date from which it is advised that dealings in Eclipse 3 Shares should only be for cash settlement and immediate delivery of documents of title Latest time for receipt of forms of proxy for the Eclipse 3 First General Meeting 12 October p.m. on 21 October 2012 Eclipse 3 First General Meeting 3.00 p.m. on 23 October 2012 Latest time for receipt of forms of proxy for the Eclipse 3 Second General Meeting 1.30 p.m. on 29 October 2012 Eclipse 3 Register of Members closed 30 October 2012 Record Date for Eclipse 3 Shareholders entitlements 5.00 p.m. on 30 October 2012 Calculation Date after 5.00 p.m. on 30 October 2012 Dealings in Eclipse 3 Shares suspended 7.30 a.m. on 31 October 2012 Eclipse 3 Second General Meeting 1.30 p.m. on 31 October 2012 Effective Date for the transfer of the assets and liabilities of Eclipse 3 to the Company and the issue of New Shares pursuant to the Eclipse 3 Scheme Announcement of the results of the Eclipse 3 Scheme 31 October October 2012 Payment of the Eclipse 3 Special Dividend 16 November 2012 Cancellation of the Eclipse 3 Shares listing 8.00 a.m. on 29 November 2012 (The last trading date for the Eclipse 3 Shares will be 30 October See the timetable for the Company with regard to admission, CREST accounts being credited and certificates being dispatched.) 15

16 EXPECTED TIMETABLE FOR ECLIPSE 4 Date from which it is advised that dealings in Eclipse 4 Shares should only be for cash settlement and immediate delivery of documents of title Latest time for receipt of forms of proxy for the Eclipse 4 First General Meeting 12 October p.m. on 21 October 2012 Eclipse 4 First General Meeting 3.30 p.m. on 23 October 2012 Latest time for receipt of forms of proxy for the Eclipse 4 Second General Meeting 2.00 p.m. on 29 October 2012 Eclipse 4 Register of Members closed 30 October 2012 Record Date for Eclipse 4 Shareholders entitlements 5.00 p.m. on 30 October 2012 Calculation Date after 5.00 p.m. on 30 October 2012 Dealings in Eclipse 4 Shares suspended 7.30 a.m. on 31 October 2012 Eclipse 4 Second General Meeting 2.00 p.m. on 31 October 2012 Effective Date for the transfer of the assets and liabilities of Eclipse 4 to the Company and the issue of New Shares pursuant to the Eclipse 4 Scheme Announcement of the results of the Eclipse 4 Scheme 31 October October 2012 Payment of the Eclipse 4 Special Dividend 16 November 2012 Cancellation of the Eclipse 4 Shares listing 8.00 a.m. on 29 November 2012 (The last trading date for the Eclipse 4 Shares will be 30 October See the timetable for the Company with regard to admission, CREST accounts being credited and certificates being dispatched.) 16

17 DEFINITIONS Acquisition Price Admission AIM Articles Basic Entitlement Board Broker Business Days CA 1985 CA 2006 Calculation Date Capita Registrars Circular Companies Company Company Merger Value CREST Directors Disclosure & Transparency Rules Eclipse 2 the price at which a participating Shareholder in the Enhanced Buyback Facility acquired their Existing Shares the New Shares allotted pursuant to the Schemes and the Enhanced Buyback Facility being listed on the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange s market for listed securities the Alternative Investment Market, a market operated by the London Stock Exchange the articles of association of the Company, as amended from time to time the entitlement of each existing Shareholder to tender 50% of their Existing Shares, rounded down to the nearest whole number the board of directors of the Company Matrix Corporate Capital LLP (or such other broker as the Company may appoint to act as its agent to implement the Enhanced Buyback Facility) any day (other than a Saturday) on which clearing banks are open for normal banking business in Sterling (and each a Business Day ) the Companies Act 1985, as amended from time to time the Companies Act 2006, as amended from time to time the date on which the Roll-Over Values and the Company Merger Value will be calculated, anticipated as being after the close of business on 30 October 2012 a trading name of Capita Registrars Limited the circular to the Company s Shareholders dated 28 September 2012 the Company and the Target VCTs Octopus Eclipse VCT plc the value of a Share calculated in accordance with Part II of this document the central securities depository for the UK markets the directors of the Company (and each a Director ) the disclosure and transparency rules of the FSA Octopus Eclipse VCT 2 plc Eclipse 2 Board the board of directors of Eclipse 2 Eclipse 2 First General Meeting Eclipse 2 Meetings Eclipse 2 Roll-Over Value the general meeting of Eclipse 2 to be held on 23 October 2012 the Eclipse 2 First General Meeting and the Eclipse 2 Second General Meeting the value of an Eclipse 2 Share calculated in accordance with Part II of this document 17

18 Eclipse 2 Scheme Eclipse 2 Second General Meeting Eclipse 2 Shareholders Eclipse 2 Shares the proposed merger of the Company with Eclipse 2 by means of placing Eclipse 2 into members voluntary liquidation pursuant to Section 110 of IA 1986 and the acquisition by the Company of all of Eclipse 2 s assets and liabilities in consideration for New Shares, further details of which are set out in Part II of this document the general meeting of Eclipse 2 to be held on 31 October 2012 holders of Eclipse 2 Shares (and each an Eclipse 2 Shareholder ) ordinary shares of 10p each in the capital of Eclipse 2 (and each an Eclipse 2 Share ) Eclipse 2 Special Dividend the special dividend to be paid by Eclipse 2 of 9.0p per Eclipse 2 Share, conditional on the Eclipse 2 Scheme becoming effective Eclipse 2 Transfer Agreement Eclipse 3 the agreement between the Company and Eclipse 2 (acting through the Liquidators) for the transfer of all of the assets and liabilities of Eclipse 2 by the Liquidators to the Company pursuant to the Eclipse 2 Scheme Octopus Eclipse VCT 3 plc Eclipse 3 Board the board of directors of Eclipse 3 Eclipse 3 First General Meeting Eclipse 3 Meetings Eclipse 3 Roll-Over Value Eclipse 3 Scheme Eclipse 3 Second General Meeting Eclipse 3 Shareholders Eclipse 3 Shares the general meeting of Eclipse 3 to be held on 23 October 2012 the Eclipse 3 First General Meeting and the Eclipse 3 Second General Meeting the value of an Eclipse 3 Share calculated in accordance with Part II of this document the proposed merger of the Company with Eclipse 3 by means of placing Eclipse 3 into members voluntary liquidation pursuant to Section 110 of IA 1986 and the acquisition by the Company of all of Eclipse 3 s assets and liabilities in consideration for New Shares, further details of which are set out in Part II of this document the general meeting of Eclipse 3 to be held on 31 October 2012 holders of Eclipse 3 Shares (and each an Eclipse 3 Shareholder ) ordinary shares of 10p each in the capital of Eclipse 3 (and each an Eclipse 3 Share ) Eclipse 3 Special Dividend the special dividend to be paid by Eclipse 3 of 8.0p per Eclipse 3 Share, conditional on the Eclipse 3 Scheme becoming effective Eclipse 3 Transfer Agreement Eclipse 4 the agreement between the Company and Eclipse 3 (acting through the Liquidators) for the transfer of all of the assets and liabilities of Eclipse 3 by the Liquidators to the Company pursuant to the Eclipse 3 Scheme Octopus Eclipse VCT 4 plc Eclipse 4 Board the board of directors of Eclipse 4 Eclipse 4 First General Meeting Eclipse 4 Meetings Eclipse 4 Roll-Over Value the general meeting of Eclipse 4 to be held on 23 October 2012 the Eclipse 4 First General Meeting and the Eclipse 4 Second General Meeting the value of an Eclipse 4 Share calculated in accordance with Part II of this document 18

19 Eclipse 4 Scheme Eclipse 4 Second General Meeting Eclipse 4 Shareholders Eclipse 4 Shares the proposed merger of the Company with Eclipse 4 by means of placing Eclipse 4 into members voluntary liquidation pursuant to Section 110 of IA 1986 and the acquisition by the Company of all of Eclipse 4 s assets and liabilities in consideration for New Shares, further details of which are set out in Part II of this document the general meeting of Eclipse 4 to be held on 31 October 2012 holders of Eclipse 4 Shares (and each a Eclipse 4 Shareholder) ordinary shares of 10p each in the capital of Eclipse 4 (and each a Eclipse 4 Share ) Eclipse 4 Special Dividend the special dividend to be paid by Eclipse 4 of 8.0p per Eclipse 4 Share, conditional on the Eclipse 4 Scheme becoming effective Eclipse 4 Transfer Agreement EEA States Effective Date Enhanced Buyback Facility Enhanced Buyback Facility Application Form Enhanced Buyback Facility Record Date Enlarged Company Existing Shares FSA FSMA the agreement between the Company and Eclipse 4 (acting through the Liquidators) for the transfer of all of the assets and liabilities of Eclipse 4 by the Liquidators to the Company pursuant to the Eclipse 4 Scheme the member states of the European Economic Area the date on which the Schemes will become effective, anticipated as being 31 October 2012 the enhanced buyback facility contained in this document the application form at the end of this document to be used by Shareholders in respect of the Enhanced Buyback Facility the record date to which Shareholders entitlements will be allocated pursuant to the Enhanced Buyback Facility, this being 5.00 p.m. on 1 November 2012 the Company, following implementation of one or more of the Schemes Shares on the register on 1 November 2012, (and each an Existing Share ) the Financial Services Authority the Financial Services and Markets Act 2000, as amended General Meeting the general meeting of the Company to be held on 23 October 2012 Half-Yearly Report HMRC IA 1986 Issue Price ITA 2007 the half-yearly report for the Company for the six month period ended 31 January 2012 Her Majesty s Revenue & Customs the Insolvency Act 1986, as amended the price at which New Shares will be issued by the Company pursuant to the Enhanced Buyback Facility the Income Tax Act 2007, as amended Liquidators William Duncan and Sarah Louise Burge, RSM Tenon Limited, 2 Wellington Place, Leeds LS1 4AP, being the proposed liquidators for each of the Target VCTs Listing Rules London Stock Exchange Memorandum the listing rules of the UKLA London Stock Exchange plc the memorandum of association of the Company Merger Regulations the Venture Capital Trusts (Winding-up and Mergers) (Tax) Regulations

20 NAV or net asset value New Shares Octopus Octopus Titan VCTs Official List Overseas Shareholders PLUS Proposed Directors Prospectus Qualifying Company Qualifying Investment Qualifying Investor Receiving Agent Record Date Resolutions Roll-Over Values RPI net asset value Shares to be issued by the Company pursuant to the Schemes and the Enhanced Buyback Facility (and each a New Share ) Octopus Investments Limited Octopus Titan VCT 1 plc, Octopus Titan VCT 2 plc, Octopus Titan VCT 3 plc, Octopus Titan VCT 4 plc and Octopus Titan VCT 5 plc the official list of the UKLA Shareholders other than UK Shareholders a prescribed market for the purposes of Section 118 of FSMA and a recognised investment exchange operated by PLUS Markets Group plc David Lambert and Alex Hambro (and each a Proposed Director ) this document a company satisfying the requirements of Chapter 4 of Part 6 of ITA 2007 an investment in a Qualifying company satisfying the requirements of Chapter 4 of Part 6 of ITA 2007 an individual aged 18 or over who satisfies the conditions of eligibility for VCT tax reliefs Capita Registrars Limited the record date to which entitlements will be allocated pursuant to the Schemes, anticipated as being 5.00 p.m. on 30 October 2012 the resolutions to be proposed at the General Meeting (and each a Resolution ) the Eclipse 2 Roll-Over Value, the Eclipse 3 Roll-Over Value and the Eclipse 4 Roll-Over Value Retail Prices Index Schemes the Eclipse 2 Scheme, the Eclipse 3 Scheme and the Eclipse 4 Scheme (and each a Scheme ) Shareholders Shares Special Dividend Special Dividends Target VCT First General Meeting Target VCT Meetings Target VCT Second General Meeting Target VCT Share holders of Shares (and each a Shareholder ) ordinary shares of 10p each in the capital of the Company (ISIN GB00B00MKB60) (and each a Share ) the special dividend to be paid by the Company of 11.0p per Share, conditional on one or more of the Schemes becoming effective the Special Dividend and the Target VCTs Special Dividends the Eclipse 2 First General Meeting or the Eclipse 3 First General Meeting or the Eclipse 4 First General Meeting, as the context permits in respect of a Target VCT, the relevant Target VCT First General Meeting and the relevant Target VCT Second General Meeting to be held on 23 October 2012 and 31 October 2012 respectively the Eclipse 2 Second General Meeting or the Eclipse 3 Second General Meeting or the Eclipse 4 Second General Meeting, as the context permits an Eclipse 2 Share or an Eclipse 3 Share or an Eclipse 4 Share, as the context permits (together Target VCT Shares ) A3: 4.1 A

21 Target VCTs Target VCTs Circular Eclipse 2, Eclipse 3 and Eclipse 4 (and each a Target VCT ) the joint circular issued by the Target VCTs to the Target VCTs Shareholders Target VCTs Shareholders Eclipse 2 Shareholders, Eclipse 3 Shareholders and Eclipse 4 Shareholders (and each a Target VCTs Shareholder ) Target VCTs Special Dividends TCGA 1992 Tender Price UK UK Shareholder UKLA or UK Listing Authority United States or US VCT or venture capital trust VCT Value the Eclipse 2 Special Dividend, the Eclipse 3 Special Dividend and the Eclipse 4 Special Dividend Taxation of Chargeable Gains Act 1992, as amended the price at which New Shares will be purchased from Shareholders by the Company pursuant to the Enhanced Buyback Facility the United Kingdom a Shareholder who is resident in, or a citizen of, the UK the UK Listing Authority, being the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 the United States of America, its states, territories and possessions including the District of Columbia a company satisfying the requirements of Chapter 3 of Part 6 of ITA 2007 for venture capital trusts the value of an investment calculated in accordance with Section 279 of ITA

22 PART I MERGER OF THE COMPANY AND THE TARGET VCTS Introduction The Board considers that the interests of the shareholders of the Company and the Target VCTs will be better served by a single, larger VCT. The most cost-effective way to achieve this is to complete a merger with the Target VCTs by placing the Target VCTs into members voluntary liquidations and for all of their assets and liabilities to be transferred to the Company in exchange for the issue of New Shares to the Target VCTs Shareholders. The New Shares to be issued pursuant to the Schemes are not being offered to the existing Shareholders of the Company or the public, save as may be the case in connection with the Schemes. A3: 3.4 Background VCTs are required to be listed on the premium segment of the Official List, which involves a significant level of listing costs as well as related fees to ensure they comply with all relevant legislation. A larger VCT should be better placed to spread such running costs across a larger asset base and facilitate better liquidity management and, as a result, may be able to maximise investment opportunities and sustain a higher level of dividends to shareholders over its life. In September 2004, the Merger Regulations were introduced allowing VCTs to be acquired by, or merge with, each other without prejudicing the VCT tax reliefs obtained by their shareholders. A number of VCTs have taken advantage of these regulations to create larger VCTs for economic and administration efficiencies, as well as to improve portfolio diversification. The separate Eclipse named VCTs were originally established so as to provide the ability to access larger deals through co-investment. As a result, 93.9% of the aggregate portfolio across the Companies is represented by venture capital investments held by two or more of the Companies as at 31 July 2012 (this representing 30.8 million out of the aggregate 32.8 million of venture capital investments). As the portfolios of the Companies are now materially invested, and due to the changes made to the VCT investment limits and size tests (in particular, the removal of the 1 million investment limit per VCT), the benefit of sister VCTs is now significantly reduced. With the above in mind, the Board and the boards of the Target VCTs have been considering a potential merger of the Companies and they announced on 16 August 2012 that such terms had been agreed in principle to create a single, larger VCT. The proposed merger follows discussions with Octopus concerning the future direction and performance of the Companies. The proposed merger of the Companies is expected to deliver cost savings and will, if effected, result in an Enlarged Company with total net assets of approximately 40 million. Based on the estimated costs of the merger (being 387,500) and the expected annual cost savings for the Enlarged Company (being 284,000), the Board believes that the costs of the merger would be recovered within 17 months. Equally important to the tangible benefit of cost savings and improved administrative efficiency, the proposed merger is also intended to bring a number of other strategic benefits to all sets of shareholders and a greater focus to the Enlarged Company s objective of improving, in the longer run, the investment performance. The Schemes The mechanism by which the proposed merger will be completed is as follows:. each Target VCT will be placed into members voluntary liquidation pursuant to a scheme of reconstruction under Section 110 IA 1986; and. all of the assets and liabilities of each Target VCT will be transferred to the Company in consideration for the issue of New Shares (which will be issued directly to the shareholders of the relevant Target VCT). In respect of each Scheme, the New Shares to be issued will be calculated on a relative net asset value basis. The relative net asset values will be the unaudited net asset values of the Companies as at the Calculation Date (this being 30 October 2012), adjusted to take into consideration each company s allocation of the estimated merger costs. 22

23 Had the Schemes been completed based on the illustrations set out in Part II of this document (which are based on the unaudited net asset values of the Companies shares as at 31 July 2012, which is prior to the payment of the Special Dividends), the number of New Shares that would have been issued are as follows for every existing Target VCT Share held: Number of New Shares Eclipse Eclipse Eclipse A3: A3: A3: Each Scheme is not conditional on the other Schemes and will proceed independently and irrespective of the other Schemes. Each Scheme will require the approval by the shareholders of the Company and the relevant Target VCT of the relevant resolutions to be proposed at the General Meeting and the relevant Target VCT Meetings respectively, as well as the other conditions set out in Part II of this document applicable to the relevant Scheme. The merger will, if effected, result in the creation of an enlarged company and should result in savings in running costs and simpler administration. As all of the Companies have the same investment policies, a number of common investments and are managed by Octopus, this is achievable without material disruption to the Companies and their combined portfolio of investments. The Board considers that the proposed merger will bring a number of benefits to all of the groups of shareholders through:. a reduction in annual running costs for the Enlarged Company compared to the aggregate annual running costs of the separate Companies;. the creation of a single VCT of a more economically efficient size with a greater capital base over which to spread annual running costs;. a greater focus to the objective of improving the investment performance in the longer term, in particular, through the agreed investment strategy for the Enlarged Company;. participation in a larger VCT with the longer term potential for a more diversified portfolio, thereby spreading the portfolio risk across a broader range of investments;. increasing the ability to support follow-on investments and new investments in the future due to the increased size and reduced running costs of the Enlarged Company; and. the potential to enhance the ability to pay dividends and buy back shares in the future due to the increased size and reduced running costs of the Enlarged Company, as well as improve liquidity in the secondary market, as it is hoped that a larger vehicle will attract increased interest. Further information is set out in Part VII of this document on the expected financial position of the Enlarged Company had the merger by way of the Schemes been implemented as at 31 January Cost Savings The Board and the boards of the Target VCTs consider that the level of continued administrative annual running costs of the individual Companies can be substantially reduced through the proposed merger resulting in benefits for all groups of shareholders. Annual running costs, excluding investment management fees, for the Companies are as follows: A1: Unaudited net assets ( )* Annual running costs ( )** Percentage of unaudited net assets (%) Company 15,866, , Eclipse 2 9,934, , Eclipse 3 12,008, , Eclipse 4 12,019, , * Taken from the unaudited management accounts to 31 July 2012 for the Companies (other than Eclipse 2) and the unaudited halfyearly report for the six month period to 31 July 2012 for Eclipse 2. 23

24 ** Annual running costs for the Companies for the 12 months to 31 July 2012 (these being the annual running costs of the relevant company excluding annual management fees, performance incentive fees and exceptional items, but taking into account any annual expenses costs cap). To the extent not all of the Schemes are completed, the benefits of the Enlarged Company may not be fully realised (in particular, the annual costs savings would be reduced accordingly). The aggregate anticipated cost of undertaking the proposed merger is approximately 387,500 including VAT, legal and professional fees, stamp duty and the costs of winding up the Target VCTs. The costs of the merger will be split proportionately between the Companies by reference to their respective merger net assets (ignoring merger costs). Completion of the three Schemes at the same time results in the aggregate merger costs (and, therefore, the Company s estimated allocation of such costs) being lower per VCT than separate mergers being completed with the Companies or other single VCTs (i.e. there are economies of scale from merging four VCTs in one transaction). Each of the Companies will continue to be responsible for its allocation of the estimated merger costs whether or not a particular Scheme is approved and becomes effective. A3: 8.1 On the assumption that the net assets of the Enlarged Company will remain the same immediately after the proposed merger, the reduction in the annual running costs (ignoring annual management fees, performance incentive fees and exceptional items) for the Enlarged Company are estimated to be at least 284,000 per annum; in particular, through the reduction in directors and advisers fees, audit fees, secretarial fees, printing costs and listing fees, as well as other fixed costs. This would represent approximately 0.71% per annum of the expected net assets of the Enlarged Company. On this basis, and assuming that no new funds were to be raised or investments realised to meet annual costs, the Board believes that the costs of the proposed merger would be recovered within 17 months. Special Dividends The Board has declared a special dividend, conditional on one or more of the Schemes becoming effective. The Target VCTs have also each declared special dividends, subject to their respective Schemes becoming effective. The amount of these Special Dividends are as follows: Special dividend per share Company 11.0p Eclipse 2 9.0p Eclipse 3 8.0p Eclipse 4 8.0p The Special Dividends are, if they become payable, expected to be paid on 16 November 2012 to the shareholders on the register of the relevant company on 30 October 2012 (i.e. prior to the Schemes becoming effective). These Special Dividends will allow the cash available within each company to be distributed to its respective shareholders prior to the Schemes becoming effective. The Merger Value and the Roll-Over Values will be adjusted accordingly to take into account the payment of these Special Dividends as they will be unpaid as at the Calculation Date. 24

25 PART II THE SCHEMES The definitions set out on pages 17 to 21 of this document shall have the same meanings when used in the context of this Part II. Eclipse 2 Scheme Conditions of the Eclipse 2 Scheme The Eclipse 2 Scheme is conditional upon:. the passing of Resolutions 1 and 2 to be proposed at the General Meeting;. notice of dissent not having been received from Eclipse 2 Shareholders holding more than 10% in nominal value of Eclipse 2 s entire issued share capital under Section 111 of IA 1986; and. the passing of the resolutions to be proposed at the Eclipse 2 Meetings. Subject to the above, the Eclipse 2 Scheme shall become effective immediately after the passing of the special resolution for the winding up of Eclipse 2 to be proposed at the Eclipse 2 Second General Meeting. If it becomes effective, the Eclipse 2 Scheme shall be binding on all Shareholders (including dissenting Eclipse 2 Shareholders) and all persons claiming through or under them. Eclipse 2 Roll-Over Value The Eclipse 2 Roll-Over Value will be calculated as: A (B + C) D where: A = the unaudited net assets of Eclipse 2 as at the Calculation Date (this being the unaudited net assets of Eclipse 2 as at 30 September 2012 (taken from the Eclipse 2 unaudited management accounts to that date)), plus (i) any increase/decrease in the valuation of an investment held by Eclipse 2 where there has been an event in the period between 30 September 2012 and the Calculation Date which requires a revaluation of the investment in accordance with Financial Reporting Standards 26 Financial Instruments: Measurement (IAS39) and using International Private Equity and Venture Capital Valuation Guidelines, (ii) any material increase/decrease in the cash position and/or debtors and/or the creditors of Eclipse 2 between 30 September 2012 and the Calculation Date, and (iii) any adjustment that both the Eclipse 2 Board and the Board consider appropriate to reflect any other actual or contingent benefit or liability of Eclipse 2 (including the Eclipse 2 Special Dividend); B = Eclipse 2 s pro rata proportion (by reference to the Roll-Over Values and the Company Merger Value, but ignoring merger costs) of the costs of the Schemes plus 10,000 (representing an amount of contingency to cover any unforeseen additional costs attributable to Eclipse 2 incurred by the Company, which will indemnify the Liquidators in respect of all costs of Eclipse 2 following the transfer on the Effective Date); C = the amount estimated to be required to purchase the holdings of Eclipse 2 Shares from dissenting Eclipse 2 Shareholders; and D = the number of Eclipse 2 Shares in issue as at close of business on the Record Date (save for any Eclipse 2 Shares held by dissenting Eclipse 2 Shareholders). 25

26 Company Merger Value The Company Merger Value will be calculated as: E F G where: E = the unaudited net assets of the Company as at the Calculation Date (this being the unaudited net assets of the Company as at 30 September 2012 (taken from the Company s unaudited management accounts to that date)), plus (i) any increase/decrease in the valuation of an investment held by the Company where there has been an event in the period between 30 September 2012 and the Calculation Date which requires a revaluation of the investment in accordance with Financial Reporting Standards 26 Financial Instruments: Measurement (IAS39) and using International Private Equity and Venture Capital Valuation Guidelines, (ii) any material increase/decrease in the cash position and/or debtors and/or the creditors of the Company between 30 September 2012 and the Calculation Date and (iii) any adjustment that both the Board and the Eclipse 2 Board consider appropriate to reflect any other actual or contingent benefit or liability of the Company (including the Special Dividend); F = the Company s pro rata proportion (by reference to the Roll-Over Values and the Company Merger Value, but ignoring merger costs) of the costs of the Schemes; and G = the number of Shares in issue as at close of business on the Record Date. New Shares to be issued to Eclipse 2 Shareholders. The number of New Shares to be issued to Eclipse 2 Shareholders (save for any dissenting Eclipse 2 Shareholders) will be calculated as follows: H ( ) X J I where: H = the Eclipse 2 Roll-Over Value; I = the Company Merger Value; and J = the number of Eclipse 2 Shares in issue as at close of business on the Record Date (save for any Eclipse 2 Shares held by dissenting Eclipse 2 Shareholders). Eclipse 2 Scheme Illustration As at 31 July 2012, the unaudited NAV of an Eclipse 2 Share (taken from the Eclipse 2 unaudited halfyearly report for the six month period ended 31 July 2012) was 53.4p. The Eclipse 2 Roll-Over Value (had the proposed merger been completed on that date and calculated as set out above, which includes an adjustment for the Eclipse 2 Special Dividend) would have been 44.0p (assuming no dissenting Eclipse 2 Shareholders). As at 31 July 2012, the unaudited NAV of a Share (taken from the Company s unaudited management accounts to that date) was 49.4p. The Company Merger Value (had the proposed merger been completed on that date and calculated as set out above, which includes an adjustment for the Special Dividend) would have been 38.1p. The number of New Shares that would have been issued to Eclipse 2 Shareholders (had the proposed merger been completed on that date and calculated as set out above) would be 21,477,551 ( New Shares for every Eclipse 2 Share held). Eclipse 3 Scheme Conditions of the Eclipse 3 Scheme The Eclipse 3 Scheme is conditional upon:. the passing of Resolutions 1 and 3 to be proposed at the General Meeting; 26

27 . notice of dissent not having been received from Eclipse 3 Shareholders holding more than 10% in nominal value of Eclipse 3 s entire issued share capital under Section 111 of IA 1986; and. the passing of the resolutions to be proposed at the Eclipse 3 Meetings. Subject to the above, the Eclipse 3 Scheme shall become effective immediately after the passing of the special resolution for the winding up of Eclipse 3 to be proposed at the Eclipse 3 Second General Meeting. If it becomes effective, the Eclipse 3 Scheme shall be binding on all Shareholders (including dissenting Eclipse 3 Shareholders) and all persons claiming through or under them. Eclipse 3 Roll-Over Value The Eclipse 3 Roll-Over Value will be calculated as: A (B + C) D where: A = the unaudited net assets of Eclipse 3 as at the Calculation Date (this being the unaudited net assets of Eclipse 3 as at 30 September 2012 (taken from the Eclipse 3 unaudited management accounts to that date)), plus (i) any increase/decrease in the valuation of an investment held by Eclipse 3 where there has been an event in the period between 30 September 2012 and the Calculation Date which requires a revaluation of the investment in accordance with Financial Reporting Standards 26 Financial Instruments: Measurement (IAS39) and using International Private Equity and Venture Capital Valuation Guidelines, (ii) any material increase/decrease in the cash position and/or debtors and/or the creditors of Eclipse 3 between 30 September 2012 and the Calculation Date, and (iii) any adjustment that both the Eclipse 3 Board and the Board consider appropriate to reflect any other actual or contingent benefit or liability of Eclipse 3 (including the Eclipse 3 Special Dividend); B = Eclipse 3 s pro rata proportion (by reference to the Roll-Over Values and the Company Merger Value, but ignoring merger costs) of the costs of the Schemes plus 10,000 (representing an amount of contingency to cover any unforeseen additional costs attributable to Eclipse 3 incurred by the Company, which will indemnify the Liquidators in respect of all costs of Eclipse 3 following the transfer on the Effective Date); C = the amount estimated to be required to purchase the holdings of Eclipse 3 Shares from dissenting Eclipse 3 Shareholders; and D = the number of Eclipse 3 Shares in issue as at close of business on the Record Date (save for any Eclipse 3 Shares held by dissenting Eclipse 3 Shareholders). Company Merger Value The Company Merger Value will be calculated as: E F G where E = the unaudited net assets of the Company as at the Calculation Date (this being the unaudited net assets of the Company as at 30 September 2012 (taken from the Company s unaudited management accounts to that date)), plus (i) any increase/decrease in the valuation of an investment held by the Company where there has been an event in the period between 30 September 2012 and the Calculation Date which requires a revaluation of the investment in accordance with Financial Reporting Standards 26 Financial Instruments: Measurement (IAS39) and using International Private Equity and Venture Capital Valuation Guidelines, (ii) any material increase/decrease in the cash position and/or debtors and/or the creditors of the Company between 30 September 2012 and the Calculation Date and (iii) any adjustment that both the Board and the Eclipse 3 Board consider appropriate to reflect any other actual or contingent benefit or liability of the Company (including the Special Dividend); F = the Company s pro rata proportion (by reference to the Roll-Over Values and the Company Merger Value, but ignoring merger costs) of the costs of the Schemes; and 27

28 G = the number of Shares in issue as at close of business on the Record Date. New Shares to be issued to Eclipse 3 Shareholders The number of New Shares to be issued to Eclipse 3 Shareholders (save for any dissenting Eclipse 3 Shareholders) will be calculated as follows: H ( ) X J I where: H = the Eclipse 3 Roll-Over Value; I = the Company Merger Value; and J = the number of Eclipse 3 Shares in issue as at close of business on the Record Date (save for any Eclipse 3 Shares held by dissenting Eclipse 3 Shareholders). Eclipse 3 Scheme Illustration As at 31 July 2012, the unaudited NAV of an Eclipse 3 Share (taken from the Eclipse 3 unaudited management accounts to that date) was 47.2p. The Eclipse 3 Roll-Over Value (had the proposed merger been completed on that date and calculated as set out above, which includes an adjustment for the Eclipse 3 Special Dividend) would have been 38.8p (assuming no dissenting Eclipse 3 Shareholders). As at 31 July 2012, the unaudited NAV of a Share (taken from the Company s unaudited management accounts to that date) was 49.4p. The Company Merger Value (had the proposed merger been completed on that date and calculated as set out above, which includes an adjustment for the Special Dividend) would have been 38.1p. The number of New Shares that would have been issued to Eclipse 3 Shareholders (had the proposed merger been completed on that date and calculated as set out above) would be 25,938,052 ( New Shares for every Eclipse 3 Share held). Eclipse 4 Scheme Conditions of the Eclipse 4 Scheme The Eclipse 4 Scheme is conditional upon:. the passing of Resolutions 1 and 4 to be proposed at the General Meeting;. notice of dissent not having been received from Eclipse 4 Shareholders holding more than 10% in nominal value of Eclipse 4 s entire issued share capital under Section 111 of IA 1986; and. the passing of the resolutions to be proposed at the Eclipse 4 Meetings. Subject to the above, the Eclipse 4 Scheme shall become effective immediately after the passing of the special resolution for the winding up of Eclipse 4 to be proposed at the Eclipse 4 Second General Meeting. If it becomes effective, the Eclipse 4 Scheme shall be binding on all Eclipse 4 Shareholders (including dissenting Eclipse 4 shareholders) and all persons claiming through or under them. Eclipse 4 Roll-Over Value The Eclipse 4 Roll-Over Value will be calculated as: A (B + C) D where: A = the unaudited net assets of Eclipse 4 as at the Calculation Date (this being the unaudited net assets of Eclipse 4 as at 30 September 2012 (taken from the Eclipse 4 management accounts to that date)), plus (i) any increase/decrease in the valuation of an investment held by Eclipse 4 where there has been an event in the period between 30 September 2012 and the Calculation Date which requires a revaluation of the investment in accordance with Financial Reporting Standards 26 Financial Instruments: Measurement (IAS39) and using International Private Equity and Venture 28

29 Capital Valuation Guidelines, (ii) any material increase/decrease in the cash position and/or debtors and/or the creditors of Eclipse 4 between 30 September 2012 and the Calculation Date, and (iii) any adjustment that both the Eclipse 4 Board and the Board consider appropriate to reflect any other actual or contingent benefit or liability of Eclipse 4 (including the Eclipse 4 Special Dividend); B = Eclipse 4 s pro rata proportion (by reference to the Roll-Over Values and the Company Merger Value, but ignoring merger costs) of the costs of the Schemes plus 10,000 (representing an amount of contingency to cover any unforeseen additional costs attributable to Eclipse 4 incurred by the Company, which will indemnify the Liquidators in respect of all costs of Eclipse 4 following the transfer on the Effective Date); C = the amount estimated to be required to purchase the holdings of Eclipse 4 Shares from dissenting Eclipse 4 Shareholders; and D = the number of Eclipse 4 Shares in issue as at close of business on the Record Date (save for any Eclipse 4 Shares held by dissenting Eclipse 4 Shareholders). Company Merger Value The Company Merger Value will be calculated as: E F G where E = the unaudited net assets of the Company as at the Calculation Date (this being the unaudited net assets of the Company as at 30 September 2012 (taken from the Company s unaudited management accounts to that date)), plus (i) any increase/decrease in the valuation of an investment held by the Company where there has been an event in the period between 30 September 2012 and the Calculation Date which requires a revaluation of the investment in accordance with Financial Reporting Standards 26 Financial Instruments: Measurement (IAS39) and using International Private Equity and Venture Capital Valuation Guidelines, (ii) any material increase/decrease in the cash position and/or debtors and/or the creditors of the Company between 30 September 2012 and the Calculation Date and (iii) any adjustment that both the Board and the Eclipse 4 Board consider appropriate to reflect any other actual or contingent benefit or liability of the Company (including the Special Dividend); F = the Company s pro rata proportion (by reference to the Roll-Over Values and the Company Merger Value, but ignoring merger costs) of the costs of the Schemes; and G = the number of Shares in issue as at close of business on the Record Date. New Shares to be issued to Eclipse 4 Shareholders. The number of New Shares to be issued to Eclipse 4 Shareholders (save for any dissenting Eclipse 4 Shareholders) will be calculated as follows: H ( ) X J I where: H = the Eclipse 4 Roll-Over Value; I = the Company Merger Value; and J = the number of Eclipse 4 Shares in issue as at close of business on the Record Date (save for any Eclipse 4 Shares held by dissenting Eclipse 4 Shareholders). Eclipse 4 Scheme Illustration As at 31 July 2012, the unaudited NAV of an Eclipse 4 Share (taken from the Eclipse 4 unaudited management accounts to that date) was 47.2p. The Eclipse 4 Roll-Over Value (had the proposed merger been completed on that date and calculated as set out above, which includes an adjustment for 29

30 the Eclipse 4 Special Dividend) would have been 38.8p (assuming no dissenting Eclipse 4 Shareholders). As at 31 July 2012, the unaudited NAV of a Share (taken from the Company s unaudited management accounts to that date) was 49.4p. The Company Merger Value (had the proposed merger been completed on that date and calculated as set out above, which includes an adjustment for the Special Dividend) would have been 38.1p. The number of New Shares that would have been issued to Eclipse 4 Shareholders (had the proposed merger been completed on that date and calculated as set out above) would be 25,962,214 ( New Shares for every Eclipse 4 Share held). Additional Information on the Schemes The New Shares to be issued pursuant to the Schemes will be issued directly to the relevant Target VCT Shareholder pro-rata to their existing holdings (disregarding Target VCT Shares held by dissenting Target VCT s Shareholders) on the instruction of the Liquidators. The merger ratio will be rounded down to six decimal places and entitlements will be rounded down to the nearest whole number and any fractional entitlements per holder of Target VCTs Shares (which will not exceed 1) will be aggregated and sold in the market and the proceeds retained for the benefit of the Enlarged Company. Where Target VCTs Shareholders hold their existing Target VCT Shares in certificated form, they will receive a new certificate for the New Shares issued. Where Target VCTs Shareholders hold their existing Target VCT Shares in uncertificated form, their CREST accounts will be credited with the holding in New Shares. A3: 4.3 Dividend payment mandates provided for existing Target VCT Shares will, unless a Target VCTs Shareholder advises otherwise in writing to Capita Registrars, be transferred to the New Shares. An application has been made to the UKLA for the New Shares to be issued pursuant to the Schemes to be listed on the premium segment of the Official List and will be made to the London Stock Exchange for such New Shares to be admitted to trading on its market for listed securities. From the date of issue, the New Shares issued pursuant to the Schemes will rank pari passu with the existing issued Shares. As is required by CA 2006, prior to the allotment of New Shares pursuant to a Scheme, the Company will be posting to the relevant Target VCT s shareholders at their registered address and uploading on to the Company s website a valuation report which will be prepared by Scott-Moncrieff. The report will confirm to the Company that the value of the relevant Target VCT s assets and liabilities which are being transferred to the Company as part of the relevant Scheme is not less than the aggregate amount treated as being paid up on the New Shares being issued to the relevant Target VCT s shareholders pursuant to that Scheme. The Liquidators will offer to purchase the holdings of dissenting Target VCTs Shareholders at the break value price of the relevant Target VCT Share (as applicable), this being an estimate of the amount a holder of such shares would receive in an ordinary winding-up of that Target VCT if all of the assets of the Target VCT had to be realised. Due to the Target VCTs investments being in unquoted companies for which there are not generally readily available purchasers, the break values for all of the Target VCTs are expected to be significantly below the unaudited net asset values of such shares. Target VCTs Shareholders should also be aware that a purchase by the Liquidators will be regarded as a disposal for HMRC purposes, thereby triggering the payment of any upfront income tax relief (assuming such shares have not been held for the minimum five year holding period) received on the original subscription. If the conditions for a Scheme, as set out above, have not been satisfied by 30 November 2012, then that Scheme shall not become effective and the relevant Companies will continue in their current form (but subject to the implementation of the other Schemes) and the boards of the relevant Companies will continue to keep the future of their respective company under review. Each Scheme is not conditional on the other Schemes and will proceed independently and irrespective of the other Schemes. 30

31 PART III ENHANCED BUYBACK FACILITY A3: 3.4 If a Shareholder does not wish to participate or is not eligible to participate in the Enhanced Buyback Facility no further action is required. Please note that the Enhanced Buyback Facility will open on 2 November 2012 (subject to Resolutions 5 and 11 to be proposed at the General Meeting being approved by Shareholders and irrespective of whether the proposed merger becomes effective). If a Scheme becomes effective, that Target VCT s shareholders will be entitled to participate in respect of their New Shares issued pursuant to the Scheme. Background The Board has previously indicated its intention to provide Shareholders with the ability to participate in an enhanced buyback facility and is pleased to now offer this facility to Shareholders. Enhanced buyback facilities are arrangements by which shareholders can sell existing shares in a VCT and reinvest the proceeds in new shares in the same VCT, on which upfront tax relief may then be available. Participation in an enhanced buyback facility in respect of Existing Shares which have not been held for five years is considered for tax purposes as a disposal and is, therefore, subject to clawback by HMRC of any upfront income tax reliefs obtained on original subscription. Shareholders should be aware that HMRC operate on a first in, first out basis in respect of allocation to Existing Shares being sold. There could also be an income tax charge for Shareholders on any excess of the Tender Price above the original issue price for the Existing Shares that are bought back and Shareholders should seek professional advice. New Shares issued to Target VCTs Shareholders will be treated as having been acquired at the same time and at the same cost of the original Target VCT Shares from which they are derived. The Enhanced Buyback Facility is conditional on the approval of Resolutions 5 and 11 to be proposed at the General Meeting. If the requisite Resolutions are not approved, the Enhanced Buyback Facility will be withdrawn. The Enhanced Buyback Facility will only be implemented to the extent the Board believes that the Company has sufficient reserves to effect the purchase of Shares pursuant to the Enhanced Buyback Facility. The Enhanced Buyback Facility is not, however, conditional on the proposed merger proceeding. How Does the Enhanced Buyback Facility Work? The Enhanced Buyback Facility comprises a tender offer by the Company to purchase Existing Shares and an offer for New Shares in the Company to be effected as follows:. The Company is making a tender offer to all UK Shareholders (and their UK beneficial holder if the Existing Shares are held by a nominee) on the register on 1 November 2012 to purchase up to 50% of the issued share capital as at that date.. Shareholders eligible to participate may tender some or all of their existing holding, such Shareholders: o o being entitled to sell up to their Basic Entitlement (this being up to 50% of their holding on the register on 1 November 2012, rounded down to the nearest whole Existing Share); and being able to tender additional Existing Shares that may be sold to the extent that other Shareholders do not participate up to the maximum available amount (any such excess to be allocated pro rata to the number of Existing Shares tendered, rounded down to the nearest whole Existing Share, subject to the discretion of the Board).. The purchase will be subject to the participating Shareholder agreeing to reinvest all of the proceeds of sale in the purchase of New Shares at the Issue Price.. The Tender Price will be a price equal to the most recently published net asset value per Share at the time of purchase, rounded down to the nearest 0.1p. A3: A3: A3: (g) A3: A3:

32 . The Issue Price will be a price equal to the most recently published net asset value per Share at the time of allotment, divided by 0.95 (to take into account the costs of the Enhanced Buyback Facility), rounded up to the nearest 0.1p. A3: Financial intermediaries will receive a commission of an amount equal to 2.5% of their client s reinvestment (which may be waived and reinvested for additional New Shares purchased on behalf of their client as part of the Enhanced Buyback Facility) and annual trail commission. The net effect for participating Shareholders is that they will substitute 1,000 Existing Shares with approximately 950 New Shares (the reduction in the value of the investment holding representing the costs of implementing the Enhanced Buyback Facility), with the reinvestment qualifying for upfront income tax relief of up to 30% of the amount reinvested if Shareholders are Qualifying Investors, which has been confirmed by HMRC. There is no requirement for any application monies to be sent by participating Shareholders who apply under the Enhanced Buyback Facility as the cost of the subscription of New Shares will be met from the proceeds of sale of the Existing Shares. The Enhanced Buyback Facility is open to UK Shareholders (and their UK beneficial holder if the Existing Shares are held by a nominee) only. The Enhanced Buyback Facility is not being offered to Overseas Shareholders and they are not entitled to participate. The maximum number of Existing Shares to be purchased pursuant to the Enhanced Buyback Facility shall be no more than 50% of the issued share capital of the Company on 1 November A3: Each UK Shareholder is entitled to tender up to their Basic Entitlement (this being up to 50% of their holding on the register on 1 November 2012, rounded down to the nearest whole Existing Share). Each UK Shareholder is also entitled to tender additional Existing Shares in excess of their Basic Entitlement in the event other Shareholders do not participate for their Basic Entitlement (the excess to be allocated pro rata to the number of Existing Shares tendered, rounded down to the nearest whole Existing Share, subject to the discretion of the Board). The Shares will be purchased at the Tender Price with the proceeds simultaneously being used to purchase New Shares at the Issue Price, rounded down to the nearest whole New Share. If the Board considers that the Company does not have sufficient reserves to lawfully implement the Enhanced Buyback Facility in full or that implementing the Enhanced Buyback Facility in respect of valid applications received would result in the Company having insufficient reserves for ongoing purposes (taking into account reserves expected to be created), the Board may reduce the maximum number of Existing Shares to be purchased under the Enhanced Buyback Facility and a Shareholder s entitlement to participate up to his or her Basic Entitlement will be reduced accordingly. The Board expects the Company to be able to implement the Enhanced Buyback Facility in full. The Board further reserves the right (following consultation with Octopus) to change the Enhanced Buyback Facility Record Date and further amend or extend (as applicable) the closing date and implementation timetable at its discretion. The New Shares will be issued in certificated form (though such New Shares can subsequently be admitted to CREST) and will rank, from the date of issue, pari passu in all respects with the existing issued share capital of the Company. A3: 4.3 Application will be made to the UK Listing Authority for the New Shares to be issued to be admitted to the premium segment of the Official List of the UK Listing Authority and to the London Stock Exchange for such shares to be admitted to trading on the London Stock Exchange s main market for listed securities. Admission is expected to take place three Business Days after allotment. The results of the Enhanced Buyback Facility, including the Tender Price and Issue Price, will be announced to the London Stock Exchange through a Regulatory Information Service. A3: A3: The full terms and conditions of the Enhanced Buyback Facility are set out in Part XII of this document. Shareholders attention is also drawn to the section entitled Risk Factors set out on pages 11 and 12 and Part IX of this document in respect of the potential tax consequences. Please also refer to the Frequently Asked Questions below for further information. Costs of the Enhanced Buyback Facility Octopus will be paid an administration fee of 5% of the gross proceeds raised through the issue of New Shares (ignoring reinvested commission) from which all costs and expenses will be paid (including initial intermediary commission but excluding annual trail commission). Any costs above this, excluding annual trail commission, will be met by Octopus. This cost is applied through the allotment process as shown above, so that the number of New Shares subscribed for will be approximately 5% less than the number A3:

33 of Existing Shares purchased pursuant to the Enhanced Buyback Facility. There will, therefore, be a corresponding small reduction to the net assets of the Company, though the net asset value per Share is not expected to be affected, save for in relation to the payment of annual trail commission (which is payable by the Company). Enhanced Buyback Facility Application Forms bearing a financial intermediary s FSA number and/or IFA stamp will be paid initial commission of 2.5% on the amount reinvested in New Shares through the Enhanced Buyback Facility. Financial intermediaries may agree to waive their initial commission in respect of an application. If this is the case, then the application for New Shares pursuant to the Enhanced Buyback Facility will be increased by the initial commission waived and the enlarged application will be applied in subscribing for New Shares at the Issue Price through the Enhanced Buyback Facility. No further fees or commission will be paid in respect of such additional New Shares. Additionally, provided that the intermediary continues to act for the client and the client continues to be the beneficial holder of the New Shares, the Company (where permitted) will pay intermediaries an annual trail commission of 0.4% of the initial net asset value for a maximum of four years. Illustration of the Enhanced Buyback Facility Based on the most recently published unaudited net asset values of the Shares as at 31 July 2012 (and taking into consideration the proposed Special Dividend), the following is an illustration of the effect for a Shareholder who tenders 10,000 Existing Shares and qualifies for the full amount of upfront tax reliefs (ignoring reinvested commissions). NAV (p) Tender Special Dividend (p) Price (p) Issue Price (p) Amount Reinvested ( ) 30% income tax relief ( ) Shares , , The Tender Price and Issue Price used above are for illustrative purposes only as the NAV per Share may be different for the purposes of calculating the actual Tender Price and Issue Price (which may be higher or lower than the example above). FREQUENTLY ASKED QUESTIONS Who should consider taking part in the Enhanced Buyback Facility?. A Shareholder who holds Existing Shares and has held them for a period of at least five years.. A Shareholder who has acquired Existing Shares in the market or otherwise where no upfront income tax relief was obtained.. A Target VCT Shareholder who receives New Shares as part of the merger process is deemed to have held such New Shares since the original date of issue of the Target VCT s shares from which the New Shares are derived. As a result, a Target VCT Shareholder who has held their shares for at least five years will be regarded as having held the New Shares for an equivalent period of at least five years. In respect of New Shares issued to Target VCTs Shareholders pursuant to the merger, what is the date of acquisition for the purposes of the five year holding period? New Shares to be issued pursuant to the merger, which will have a deemed acquisition date of the date the original Target VCT Shares (from which the New Shares are derived) were originally acquired. When should Enhanced Buyback Facility Forms be submitted? Enhanced Buyback Facility Forms should be submitted after the Enhanced Buyback Facility Record Date and, where relevant, once a participating Shareholder is in receipt of their relevant share certificate. If a holding in CREST needs to be rematerialised (see below), a participating Shareholder will need to await receipt of their share certificate from Capita Registrars before submitting their Enhanced Buyback Facility Form. If the participating Shareholder is a Target VCT shareholder, he or she will need to await receipt of the certificate for New Shares issued pursuant to the relevant Scheme. 33

34 What amount of Existing Shares held can be sold? Shareholders eligible to participate can apply to sell some or all of their Existing Shares. Such Shareholders will, subject to receipt of a valid Enhanced Buyback Application Form, be entitled to sell up to their Basic Entitlement (this being up to 50% of their holding on the register on 1 November 2012 rounded down to the nearest whole Existing Share). Shareholders may also tender additional Existing Shares in excess of their Basic Entitlement to the extent that other Shareholders do not participate for their basic Entitlement, up to the maximum available amount. The excess will be allocated pro rata to the amount of Existing Shares tendered, subject to the discretion of the Board. What are the tax consequences of the Enhanced Buyback Facility? Shareholders are referred to paragraph 2 on page 61 in respect of the tax consequences of participating in the Enhanced Buyback Facility. Shareholders should seek professional advice. What should a Shareholder do if Existing Shares are held in CREST? If Existing Shares are held by a nominee and through CREST, please see the answer to the question below. If Existing Shares are personally held in CREST, holdings will first need to be rematerialised into certificated form in order to participate. Shareholders are recommended to contact their broker or speak with the Company s registrar, Capita Registrars, for assistance in rematerialising holdings. Once in receipt of the share certificate, this must then be submitted, together with the Enhanced Buyback Facility Application Form. What if Existing Shares are held by a nominee and the beneficial shareholder wishes to participate in the Enhanced Buyback Facility? Both the nominee and the beneficial shareholder will need to complete the Enhanced Buyback Facility Application Form confirming that they wish to proceed by the nominee selling the holding in Existing Shares on behalf of the beneficial shareholder and the beneficial shareholder applying for the New Shares in his or her own name (so as to be able to obtain the income tax relief associated therewith). A separate Enhanced Buyback Facility Application Form can be requested from Octopus where a nominee holds Existing Shares in one holding for multiple beneficial shareholders. If Existing Shares are held through CREST, then the nominee will need to liaise with their broker to rematerialise the Existing Shares first (as detailed above). The New Shares (and the tax certificate) and share certificate will be issued in the name of the beneficial shareholder but the New Shares can then be transferred back to the nominee as required. Will New Shares be issued in certificated form or through CREST? New Shares issued as part of the Enhanced Buyback Facility will be in certificated form. Shareholders can then arrange through their broker or nominees for these New Shares to be subsequently admitted to CREST. What if Existing Shares are held in more than one registered holding? If Existing Shares are held in different registered holdings, the maximum participation is up to 50% of each holding and any excess Shares which may be tendered to the extent other Shareholders do not participate or tender up to their basic entitlement. A separate Enhanced Buyback Facility Application Form must be returned in respect of each such holding. Are there any disadvantages to participating in the Enhanced Buyback Facility? If a Shareholder participates in the Enhanced Buyback Facility, the Shareholder will acquire new VCT shares. If that Shareholder qualifies for any upfront income tax relief on the reinvestment in New Shares, the Shareholder will need to hold these shares for five years from the date of issue in order to retain such relief. Sale (or other disposal) of the New Shares prior to the requisite minimum five year holding period will result in a clawback of such relief by HMRC. There could also be an income tax charge and/or a capital gain tax charge on the disposal of the Shareholders original Shares (see paragraph 2 on page 61). 34

35 Can Shares be transferred and the transferee participate? Yes, if Shares have been transferred and such transfer has been recorded on the Company s register of members prior to the Enhanced Buyback Facility Record Date (this being 1 November 2012). Any transfer which is recorded thereafter will not allow the transferee to participate as the Enhanced Buyback Facility Record Date sets the date for entitlements to be determined for participation. Can a Shareholder participate in the Enhanced Buyback Facility and not reinvest? No. The terms of the Enhanced Buyback Facility do not allow Shareholders to obtain cash from the buyback of their Existing Shares. The process requires a Shareholder to agree to simultaneously reinvest all of the proceeds of sale in New Shares. If Existing Shares have been bought at different times which ones are deemed to have been sold? VCTs have different rules to normal companies and, therefore, the first Existing Shares bought in the Company by a Shareholder are the first to be sold (i.e. first in, first out basis). This same process will apply where Existing Shares have been issued through the merger (i.e. the Existing Shares are treated as if they have been acquired at the same date and at the same price as the original Target VCTs Shares. Who should Shareholders contact if they have queries about the Enhanced Buyback Facility or their shareholdings? Shareholders who have queries in respect of the Enhanced Buyback Facility should contact Octopus, telephone: between the hours of 8.00 a.m. and 6.00 p.m. on any Business Day. No financial, legal, tax or investment advice will be given. Shareholders who have queries about their holdings and/or date(s) of acquisition should contact the Company registrars, Capita Registrars, telephone: from within the UK or on if calling from outside the UK. Calls to the number cost 10p per minute from a BT landline. Other network providers may vary. Lines are open Monday to Friday 9.00 a.m p.m. (London time), No financial, legal, tax or investment advice will be given. What is the procedure for applying pursuant to the Enhanced Buyback Facility? To apply to participate in the Enhanced Buyback Facility, Shareholders must complete and return the Enhanced Buyback Facility Application Form (at the end of this document), together with their relevant share certificate by post using the pre-paid envelope provided or alternatively to Octopus Investments Limited, 20 Old Bailey, London EC4M 7AN or hand delivered (during normal business hours only). Further details on how to complete the Enhanced Buyback Facility Application Form are set out in Part XII. 35

36 PART IV INFORMATION ON THE COMPANY Constitution and Status The Company was incorporated and registered in England and Wales under CA 1985 as a public company with limited liability on 16 March 2004, with registered number under the name Eclipse VCT plc. The Company name was changed to Octopus Eclipse VCT plc on 12 November The Company was issued with a trading certificate under Section 117 of CA 1985 (now Section 761 of CA 2006) on 13 April The Company operates under CA 2006 and the regulations made thereunder. VCTs are unregulated, but are required to manage their affairs to obtain and maintain approval as a VCT under the provisions of Chapter 3 of Part 6 of ITA HMRC has granted approval of the Company as a VCT under Section 259 of ITA The business of the Company has been, and it is intended will be, carried on so as to continue to comply with that section to maintain full approval. The Company is not authorised and/or regulated by the FSA or an equivalent overseas regulator. The Company s Shares are listed on the premium segment of the Official List. A1: A1: A1: A3: 4.2 A15: 1.3 Share Capital The share capital of the Company comprises ordinary shares of 10p each of which 32,091,513 are currently in issue (as at 27 September 2012). The maximum number of New Shares to be issued in connection with the Schemes and the Enhanced Buyback Facility is 170 million. Share certificates for existing Shares will continue to be valid and will not be replaced following the Schemes and the Enhanced Buyback Facility becoming effective (unless a Shareholder participates and tenders such Existing Shares pursuant to the Enhanced Buyback Facility). Selected Financial Information Certain selected financial information of the Company is set out below: Unaudited six months ended 31 January 2012 Audited year ended 31 July 2011 Audited year ended 31 July 2010 Audited 14 month period ended 31 July 2009 Total profit/(loss) on ordinary activities before taxation ( 000s) (1,804) (1,149) 1,801 (3,798) Total net asset value return per share (p) (5.7) (3.5) 5.7 (11.6) Dividends paid per Share (p) Net assets ( 000s) 17,968 21,351 25,115 25,419 NAV per Share (p) The Board The Board and the Target VCTs Boards have considered what the size and future composition of the Enlarged Company s board should be following the proposed merger and it has been agreed that (on the assumption that all of the Schemes become effective) David Lambert (an Eclipse 2 director) and Alex Hambro (chairman of Eclipse 4) will be appointed as additional directors of the Company. It is also proposed that Roger Penlington will step down as chairman of the Audit Committee and David Lambert will be appointed in his place. Aggregate annual directors fee entitlements across the Companies are currently 206,500. The aggregate annual directors fees for the Enlarged Company will be 90,500, resulting in an aggregate annual saving of 116,000 across the Companies. In order to reflect the additional directors being appointed to the Board and the aggregate remuneration intended for the Enlarged Company, the Board is seeking Shareholder approval at the General Meeting to increase the cap on the directors annual A1:

37 ordinary remuneration from 75,000 to 95,000. If Shareholder approval is not obtained, the aggregate annual remuneration directors for the Enlarged Company will be 75,000 (with directors fees being reduced pro rata). Directors Viscount Cobham (64) (Chairman) Viscount Cobham was, until his retirement from full time City employment, deputy chairman of Smith & Williamson where he had overall responsibility for the company s fund management division. He retired as a consultant to the company in October Prior to leading the buy-out of NCL Investments in 1986 he spent 16 years with Wood Gundy, then a leading Canadian investment banking firm. Prior to his departure his role at Wood Gundy was a director of their UK and Middle Eastern Operations. Viscount Cobham was also elected to the Board of The Securities and Futures Authority in 1996 and remained a board member until Viscount Cobham is now chairman of Azure Wealth LLP. Matt Cooper (45) Matt Cooper is the chairman of Octopus, the investment manager of the Companies. Prior to joining Octopus, Matt was the principal managing director of Capital One Bank (Europe) plc, where he was responsible for all aspects of the company s strategic direction and day-to-day operations in Europe. He led the UK portion of the business from start-up to two million customers, generating revenues of over 275 million and employing over 2,000 people. Matt is also chairman of Imaginatik plc and a nonexecutive director of 10Duke Software Limited, MyDish Limited, Global Collect and eight other VCTs. Roger Penlington (65) Roger Penlington qualified as a management accountant with Ford Motor Company Limited before moving into senior general management with Air Call Plc and Avis Rent a Car Limited. He then founded the Heathrow Business Centre, which was sold to Thomas Cook Limited. In 1987, Roger joined HSBC Private Equity as investment director, responsible for sourcing, leading and managing venture capital investments. In 1995, he joined Guinness Mahon Development Capital as a director, responsible for deals between 250,000 and 2 million. In May 1998, Roger was a member of the management team which acquired ProVen Private Equity from Guinness Mahon Group Limited. Until 28 September 2010, Roger was a non-executive director of Octopus Apollo VCT 1 plc and Octopus Apollo VCT 2 plc, funds which are also managed by Octopus. Proposed Directors David Lambert (56) David Lambert has over 25 years experience of private equity investment in smaller middle market UK companies. Formerly managing director of Royal Bank Development Capital, which comprised six offices across the UK focusing on private equity investments up to 10 million, he was responsible for developing this business from its original inception as the NatWest Pioneer Fund, commencing with a single office in Nottingham and an initial focus on investments up to 1 million. Prior to this, he was a director with NatWest Equity Partners, and more recently was a non-executive director of Catapult Venture Managers Limited, which is a private equity investment manager. Alex Hambro (50) Alex Hambro has spent the last 21 years in the venture capital and private equity sector, much of this time at Hambros plc and associate organisations. As a director of Hambro Group Investments, he was responsible for the establishment and operations of the Hambro Private Equity Group, which sponsored nine fund managers in the UK, Europe, the US and Australia. Since leaving Hambros in 1999, he has assisted a number of venture capital organisations with their fundraising and marketing programmes and has acted as a consultant to a number of investors on their venture capital investment strategies. Corporate Governance The Financial Services Authority requires all listed companies to disclose how they have applied the principles and complied with the provisions of The UK Corporate Governance Code (formerly the Combined Code) ( the Code ) issued by the Financial Reporting Council ( FRC ) in May A1:

38 The Board has considered the principles and recommendations of the AIC Code of Corporate Governance ( AIC Code ) by reference to the AIC Corporate Governance Guide for Investment Companies ( AIC Guide ). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. The Board considers that reporting against the principles and recommendations of the AIC Code, by reference to the AIC Guide (which incorporates, and is used in addition to, the Code), will provide better information to shareholders. For the year ended 31 July 2011 and as at the date of this document, the Company has complied with the recommendations of the AIC Code and the relevant provisions of the Code, except where noted below. The preamble to the Code does acknowledge that some provisions may have less relevance for investment companies, adding that the AIC Code and AIC Guide can assist in meeting the obligations under the Code. The area and reason for non-compliance are as follows:. The Company does not have a chief executive officer or senior independent director. The Board does not consider this necessary for the size of the Company.. New directors do not receive a full, formal and tailored induction on joining the Board. Such matters are addressed on an individual basis as they arise.. The Company has two independent Directors; Viscount Cobham and Roger Penlington, as defined by the Code. Matt Cooper holds directorships of other companies managed by Octopus and within Octopus itself. The Board considers that all Directors have sufficient experience to be able to exercise proper judgement within the meaning of the Code.. All of the Directors are not subject to annual election by the Shareholders as one third of the Directors retire by rotation and are offered for re-election at the annual general meeting in accordance with the Articles.. The Company conducts a formal review as to whether there is a need for an internal audit function. However, the Directors do not consider that an internal audit would be an appropriate control for a venture capital trust.. The Company does not have a remuneration committee as it does not have any executive directors.. The Company has no major shareholders, therefore, Shareholders are not given the opportunity to meet any non-executive directors at a specific meeting other than the annual general meeting. Further details on the Company s corporate governance including the constitution of the various committees and other internal controls are set out in paragraph 7 of Part XI of this document. Investment Manager The Company s investment manager is Octopus, the same investment manager as for the Target VCTs. Octopus is a private limited company incorporated and registered in England and Wales on 8 March 2000 with registered number Octopus registered office and principal place of business is at 20 Old Bailey, London EC4M 7AN (telephone ). The principal legislation under which Octopus operates is CA 2006 (and regulations made thereunder). Octopus also provides administration services to all of the Companies. Octopus is one of the UK s leading fund management companies with more than 2.7 billion under management (as at 31 May 2012). Octopus has more than 200 staff, including over 50 investment professionals, and has twice been voted as one of the Top 100 Small and Medium-Sized Companies to Work For in the Sunday Times. Within financial services, Octopus has developed a reputation for quality and innovation and prides itself on providing exceptional levels of service to all its customers. Octopus has received an AAA rating for financial planning from Citywire for two years in succession one of only two fund management companies to achieve this. Octopus currently manages 19 VCTs more than any other fund manager. Financial advisers have voted Octopus VCT Provider of the Year at the Professional Adviser Awards in 2007, 2008, 2009 and A15:

39 2010, Octopus was also named VCT Manager of the Year at the unquote British private Equity Awards for Investment Objective and Policy The investment objective and investment policy of the Company are set out below. A15: 1.1 Investment Objective The investment objective of the Company is to invest in a broad range of AIM-quoted and smaller unquoted UK companies which meet the relevant criteria for VCTs in order to generate income and capital growth over the long term. Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value. Investment Policy The Company s investment policy has been designed to enable the Company to comply with the VCT qualifying conditions. The Directors intend that the long term disposition of the Company s assets will be not less than 80% in a portfolio of AIM-quoted and unquoted investments and up to 20% in cash or near-cash investments, to provide a reserve of liquidity which will maximise the Company s flexibility as to the timing of investment acquisitions and disposals, dividend payments and share buybacks. Investments will be structured using various quoted and unquoted investment instruments, including Ordinary and Preference shares, loan stocks and convertible securities, to achieve an appropriate balance of income and capital growth, having regard to the VCT legislation. The portfolio will be diversified by investing in a broad range of industry sectors and by holding investments in companies at various stages of maturity in the corporate development cycle. The normal investment holding period will be in the range from three to seven years. Any un-invested funds will typically be held in cash and money market securities. Risk is spread by investing in a number of different businesses within different industry sectors using a mixture of securities. The maximum amount invested in any one company will be limited to any HMRC annual investment limits and generally no more than 15% of the Company s assets, at cost, will be invested in the same company. The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale. However, Shareholders should be aware that the Company s VCT qualifying investments are held with a view to long-term capital growth as well as income and will often have limited marketability; as a result it is possible that individual holdings may grow in value to the point where they represent a significantly higher proportion of total assets prior to a realisation opportunity being available. Investments will normally be made using the Company s shareholders funds and it is not intended that the Company will take on any long-term borrowings. No material changes may be made to the Company s investment policy described above without the prior approval of shareholders by the passing of an ordinary resolution. The Directors will continually monitor the investment process and ensure compliance with the investment policy. The Company and Octopus have agreed that the investment focus going forward (in particular, for the Enlarged Company following the proposed merger) will be on the provision of growth and development capital to companies which are profitable or on a clear path to profitability. Co-investment Policy Where more than one of the companies managed or advised by Octopus wishes to participate in an investment opportunity, allocations will be made in accordance with Octopus allocation policy as at the date of allocation. The policy provides that allocations should be initially offered to the Company on a basis which is pro-rata to its net asset value (or as otherwise agreed by the Board and Octopus, the current agreement being pro rata to funds available). In the event of a conflict of interests on the part of Octopus or where co-investment is proposed to be made other than on a pro-rata basis (or as otherwise agreed by the Board and Octopus), such an investment will require the approval of those members of the Board who are independent of Octopus. A15:

40 Dividend Policy The dividend policy of the Company is to maintain a regular dividend flow where possible in order to take advantage of the tax free distributions a VCT is able to provide. The Company has paid an average annual dividend of 9.7p per Share over the last three years (ignoring the Special Dividend). The Board intends to target annual dividends of 5% of NAV, plus further special distributions (when realisations permit) following the proposed merger. A1: 20.7 Dividend payments will be subject to available cash, portfolio requirements, distributable reserves and applicable law at the relevant time. Share Issues and Buybacks The Company proposes (in addition to the authorities to allow for the Enhanced Buyback Facility to take place) to renew its authorities to issue Shares (having disapplied pre-emption rights) following the proposed merger up to 10% of its enlarged share capital for the purposes of small top up offers. The Board also intends to continue to consider repurchasing Shares (in addition to the Enhanced Buyback Facility) following the proposed merger pursuant to a general buyback policy. The Board believes that it is in the best interests of the Company and the Shareholders to make occasional market purchases of the Shares, to allow any Shareholders who need to sell their Shares to do so and to reduce, to a degree, any discount to NAV in the current market price than might otherwise prevail. The Board will agree the discount to NAV at which Shares will be bought back (intended to be at 10%) and the aggregate number of Shares to be repurchased (currently 5%, from time to time, of the issued share capital of the Company), and regularly reviews the buyback policy. Any future repurchases will be made in accordance with guidelines established by the Board from time to time and will be subject to having the appropriate authorities from the Shareholders and sufficient funds available for this purpose. Share buybacks will also be subject to the Listing Rules and any applicable law at the relevant time. Shares bought back in the market will ordinarily be cancelled. Investment Portfolios The table below sets out the latest published NAVs of the Companies, together with the number of venture capital investments within the portfolios of each company and the respective carrying value of these investments. A15: 8.3 A1: Date of launch Funds raised since launch ( ) Unaudited net assets ( )* NAV per share (p)* Number of venture capital investments* Carrying value of the venture capital investments ( )* Company April million 15,866, million Eclipse 2 January million 9,934, million Eclipse 3 August million 12,008, million Eclipse 4 August million 12,019, million * Taken from the unaudited management accounts to 31 July 2012 for the Companies (other than Eclipse 2) and the unaudited halfyearly report for the six month period ended 31 July 2012 for Eclipse 2. Further details on the Companies portfolios can be found in Part VIII of this document. Investment Management and Administration Arrangements Octopus is the investment manager of all of the Companies and also provides administration services to all of the Companies. In respect of the Company, Octopus receives an annual investment management fee of an amount equal to 2% of the net assets of the Company at the end of the preceding accounting period (this being 417,162 for the 12 months to 31 July 2012), payable quarterly in advance (plus any applicable VAT). Octopus also receives an annual administration fee equal to 0.3% of the net assets of the Company at the end of the preceding accounting period (this being 62,574 for the 12 months to 31 July 2012), payable quarterly in advance (plus applicable VAT). These fee arrangements will continue to apply to the Enlarged Company, but will be across the enlarged net assets. 40

41 The investment focus for the Enlarged Company will be on providing growth and development capital, with a focus on established new opportunities. In pursuance of this strategy, the Board and Octopus have agreed that no more than 30% of new investments in a rolling three year period following the proposed merger will be in investee companies in which any of the Octopus Titan VCTs have invested. The Board will also retain a veto right in respect of all investments and divestments. Normal annual running costs of the Company are capped at an amount equal to 3.6% of the Company s average net assets. Normal running costs for these purposes means the ordinary expenses incurred by the Company, but does not include annual trail commission, performance incentive fees, irrecoverable VAT and any exceptional items. Any expenses in excess of this annual cap are borne by Octopus. Octopus has agreed, subject to one or more of the Schemes becoming effective, to reduce this annual cap to an amount equal to 2.75% of the Company s average net assets. Shareholders approved a co-investment scheme in 2005 whereby Octopus employees are able to invest alongside the Companies. The terms of the co-investment scheme state that Octopus procure that those of its employees participating in the scheme invest a total of 7.5% of the amount invested in ordinary shares by the Companies in each investment made (other than investments in companies quoted on AIM or investments which are structured entirely as ordinary shares). The shares held by Octopus employees are held through a nominee company controlled by Octopus, will be acquired and realised at the same time and on the same terms (in relation to the relevant securities) as shares held by the Companies, and all voting and other rights attributable to those shares will be exercised by Octopus in parallel with the shares held by the Companies. The co-investment scheme will continue to operate in respect of the Enlarged Company. Octopus is also entitled to performance related incentive fees once distributions per Share in issue since launch have reached 45p in aggregate. Octopus will then be paid an amount (in respect of each Share issued pursuant to the original launch prospectus issued by the Company and remaining in issue on a Payment Date) equal to 20% of the Increase in Value on the relevant Payment Date, subject to the Total Return exceeding the Hurdle Value on that Payment Date. For these purposes:. Payment Date means the date on which the Company publishes audited accounts in the years 2007 to 2015;. Total Return means the NAV per Share as at the Payment Date plus dividends paid or declared per Share in issue from launch;. Hurdle Value means the Total Return on the date Shares were first issued, increased by simple interest at an annual rate of 7.5% to the relevant Payment Date; and. Increase in Value means the amount by which the Total Return exceeds (i) the Total Return on the date Shares were first issued in respect of the Payment Date and (ii) thereafter, the Total Return on the Payment Date when the Hurdle Value was last exceeded. The Board and Octopus have agreed that, subject to one or more of the Schemes becoming effective, the above performance related incentive fee arrangement will be terminated. The Board will, acting reasonably and in good faith, but subject to legal and regulatory requirements, consider implementing a new performance related incentive fee arrangement to suitably incentivise Octopus when the overall performance of the assets of the Company improves. Secretary and Custodian Patricia Standaloft ACIS, an employee of Octopus, is the appointed Company Secretary and through Octopus provides the necessary company secretarial services to the Company. Octopus provides custodian services to the Company. A15: 5.1 VCT Status Monitoring PricewaterhouseCoopers LLP is the Company s VCT status adviser. It carries out reviews of the Company s investment portfolio to ensure compliance and, when requested to do so by the Board or Octopus, reviews prospective investments to ensure that they are qualifying investments. The VCT tax implications of the Schemes have been advised upon by SGH Martineau LLP. 41

42 Duration of the Company The Articles provide for a resolution to be proposed for the continuation of the Company as a VCT at the annual general meeting of the Company to be held in 2014 and at five-yearly intervals thereafter. Investor Communications The Board places a great deal of importance on communications with its Shareholders and supports open communication with Shareholders. In addition to the announcement and publication of the annual report and accounts, and the half-yearly results for the Company as detailed below, the Company also publishes interim management statements as required by the Disclosure and Transparency Rules. Reporting Dates The Company has extended its current accounting period to 30 September 2012 so as to avoid financial statements needing to be published part way through the proposed merger and the associated costs. Year End Announcement and publication of annual report and accounts to Shareholders Announcement and publication of half-yearly results 30 September January May Valuation Policy The Company s unquoted investments are valued at fair value through profit or loss in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward looking estimates and judgements about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgements the valuation, which is undertaken by Octopus, takes into account all known material facts up to the date of approval of the financial statements by the Board. The Company s quoted investments are valued at their bid prices. The Company s net asset value is calculated at every quarter and published on an appropriate regulatory information service. If for any reason valuations are suspended, Shareholders will be notified in a similar manner. A15: 6.1 A15: 3.4 A15:

43 PART V THE INVESTMENT MANAGER Octopus The investment manager to the Company is Octopus, the same investment manager as for the Target VCTs. Octopus also provides administration services to the Company. Octopus is one of the UK s leading fund management companies with more than 2.7 billion under management (as at 31 May 2012). Octopus has more than 200 staff, including over 50 investment professionals, and has twice been voted as one of the Top 100 Small and Medium-Sized Companies to Work For in the Sunday Times. Within financial services, Octopus has developed a reputation for quality and innovation and prides itself on providing exceptional levels of service to all its customers. Octopus has received an AAA rating for financial planning from Citywire for two years in succession one of only two fund management companies to achieve this. Octopus currently manages 16 VCTs more than any other fund manager. Financial advisers have voted Octopus VCT Provider of the Year at the Professional Adviser Awards in 2007, 2008, 2009 and 2010, Octopus was also named VCT Manager of the Year at the unquote British private Equity Awards for Team As part of the Board s regular review of the performance of Octopus, the Board has agreed some important changes in the way Octopus is providing its services to the Board. Deal identification and proposals to the Company is now handled by a broader group of venture managers within Octopus, thus benefiting the Company from the scale of resource that resides within Octopus across the board. The venture team currently managing the investments of the Company and the Target VCTs will continue to manage the Enlarged Company. The Octopus venture team includes the following individuals: Alex Macpherson Alex has overall responsibility for Ventures investments at Octopus, and focuses on assessing potential investee companies, deal structuring, negotiation and portfolio management with a view to maximising the returns that are generated. He has extensive experience of investing into smaller companies. Prior to joining Octopus, he worked for ten years at SG Warburg as a trade and risk manager in equity derivatives, and later founded a growth consultancy for small businesses, assisting a number of small businesses with their financing requirements prior to taking up his current position. Jane Vinson Jane has responsibility for the portfolio management of the Company and the Target VCTs, the individual trading performance of the underlying businesses and the eventual exit process of these investments. Prior to joining Octopus, she spent 10 years at Bridgepoint Capital. During this time she was involved in managing over 80 investments, often taking a board seat, and assisted with or led over 60 exits. Jane is a chartered management accountant and graduated with a BA in Accounting from Portsmouth University. Alan Wallace Alan focuses on sourcing deal flow, evaluating and assessing potential investee companies and portfolio management. Prior to joining Octopus, he held senior positions at Sara Lee UK Ltd, Rank Hovis McDougall, and Cambridge Nutrition Holdings Ltd. He was also managing director of Dairy Crest and Premier Brands (Hillsdown) and Market Planning Director for GUS. He has over fifteen years general management experience. Alan has a PhD in Management Science from Manchester University and graduated with a BA in Economics from Liverpool University. Alan is a founding team member. 43

44 Jo Oliver Jo joined Octopus in May 2009 and has extensive experience as a founder, advisor and investor into both larger and smaller companies. Jo is involved in all aspects of the investment process and portfolio management, as well as being responsible for the Venture Partners and a Non-Executive Director of Octopus Titan VCT 5. Prior to joining Octopus, Jo was an active investor into smaller companies, and held senior roles in equity research at Merrill Lynch and Lehman Brothers. Here, he advised on numerous floats and IPOs. Jo is a chartered accountant and worked at Arthur Andersen between 1991 and He has a degree in Natural Sciences from Durham University. Alliott Cole Alliott is involved throughout the investment process including sourcing deal flow, evaluating and assessing potential investee companies through to negotiation and documentation of deal terms and on to portfolio management. Prior to joining Octopus, he spent four years at the international law firm Ashurst, where he worked within the corporate finance and private equity team advising on a number of high profile transactions for clients including Goldman Sachs, Apax Partners, Sporting Bet, N M Rothschild and Terra Firma. Alliott has a Masters in Literae Humaniores from Oxford University. Luke Hakes Luke is involved throughout the investment process including sourcing deal flow, evaluating and assessing potential investee companies through to negotiation and documentation of deal terms and on to portfolio management. After starting his career as a research scientist, Luke moved into Management and Technology consulting where he spent a number of years helping large blue chip companies address their performance and operational deficiencies. Luke holds a BSc in Biochemistry and Biotechnology, an MSc in Bioinformatics and a PhD in Computational Genetics. Frederic Lardieg Frederic was previously a Principal at Vodafone Ventures, where he was responsible for sourcing, executing and managing venture capital deals. He was responsible for all aspects of the transactions from deal negotiation to Board representation. Previously, Frederic worked in M&A at Vodafone and in corporate strategy at Sony Ericsson. Prior to these roles, Frederic worked for and founded start-ups in the mobile and internet spaces. Frederic has an MSc in Industrial Engineering and an MBA from INSEAD. Simon King Simon is an Analyst in the Ventures division of Octopus Investments. Simon focuses on early stage deal flow, screening investment opportunities and performing preliminary due diligence. Before joining Octopus, Simon was a research scientist investigating novel materials for photovoltaic applications at Imperial College in London. Simon holds an MA and MSc in Physics and a PhD in Molecular Electronics. Simon Andrews Simon focuses on portfolio management. He brings ten years experience in equity research and analysis, along with portfolio management and has particular expertise in technology companies. Prior to joining Octopus, he spent four years with Silicon Valley Bank providing M&A advisory and equity and debt financing solutions for early stage and venture-backed companies. Previously he held senior roles at Jefferies International, Lehman Brothers, Merrill Lynch and BNP Paribas. Simon graduated from Southampton University and Grenoble with a degree in European Studies and holds the SFA and IMC qualifications. He is a fluent French speaker. Octopus remain committed to providing a high standard of service to the Company, including adding to the team to compliment and add to the skills set it already has. The Board and Octopus have agreed that, following the proposed merger, they will meet annually to discuss and agree the level of resources required within Octopus to deliver the investment mandate for the Enlarged Company. 44

45 PART VI FINANCIAL INFORMATION ON THE COMPANY AND THE TARGET VCTS Audited financial information on the Companies (other than Eclipse 2) is published in their respective annual reports for the years ended 31 July 2009, 2010 and 2011 and their respective half-yearly reports for the six month periods ended 31 January Audited financial information on Eclipse 2 is published in its annual reports for the years ended 31 January 2010, 2011 and 2012 and its half-yearly report for the six month period ended 31 July The annual reports for the Companies referred to above were audited by Grant Thornton UK LLP, 3140 Rowan Place, John Smith Drive, Oxford Business Park South, Oxford OX4 2WB and were reported on without qualification and contained no statements under Section 495 to Section 497A of CA The annual reports and half-yearly reports referred to above were all prepared in accordance with UK generally accepted accounting practice (GAAP), the fair value rules of CA 2006 and the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts. A1: A1: 2.1 A1: The annual reports and half-yearly reports contain a description of the relevant company s financial condition, changes in financial condition and results of operation for each relevant financial year. The annual reports are incorporated in full by reference (which contain the information as detailed below) and can be accessed at the following website: and are also available for inspection through the national storage mechanism, which can be accessed at the following website: Company Description 2009 Annual Report 2010 Annual Report 2011 Annual Report 2012 Half-Yearly Report Balance Sheet Page 35 Page 33 Page 47 Page 15 Income Statement (or equivalent) Page 33 Page 31 Page 44 Page 12 Statement showing all changes in equity (or equivalent note) Page 34 Page 32 Page 46 Page 14 Cash Flow Statement Page 36 Page 34 Page 48 Page 16 Accounting Policies and Notes Page 37 Page 36 Page 50 Page 18 Auditors Report Page 31 Page 30 Page 42 Page n/a A1: 20.7 A1: A1: 9.1 A1: A1: 3.1 A1: 20.1 A1: A1: 19 This information has been prepared in a form consistent with that which will be adopted in the Company s next published annual financial statements having regard to accounting standards and policies and legislation applicable to those financial statements. 45

46 The reports also include operating/financial reviews as follows: Description 2009 Annual Report 2010 Annual Report 2011 Annual Report 2012 Half-Yearly Report Objectives Page 18 Page 17 Page 24 Page 2 Financial Highlights Page 2 Page 3 Page 4 Page 5 Chairman s Statement Page 3 Page 4 Page 5 Page 6 Manager s Report Page 5 Page 6 Page 8 Page n/a Portfolio Summary Page 6 Page 7 Page 12 Page 8 Investment Policy Page 5 Page 6 Page 24 Page 4 Valuation Policy Page 37 Page 8 Page 11 Page n/a A1: 20.7 A1: 9.1 A1: A1: 3.1 A1: 20.1 A1: A1: 19 Eclipse 2 Description 2010 Annual Report 2011 Annual Report 2012 Annual Report 2012 Half-Yearly Report Balance Sheet Page 36 Page 44 Page 46 Page 15 Income Statement (or equivalent) Page 34 Page 41 Page 43 Page 12 Statement showing all changes in equity (or equivalent note) Page 35 Page 43 Page 45 Page 14 Cash Flow Statement Page 37 Page 45 Page 47 Page 16 Accounting Policies and Notes Page 39 Page 47 Page 49 Page 18 Auditors Report Page 33 Page 39 Page 41 Page n/a A1: 20.7 A1: 9.1 A1: A1: 3.1 A1: 20.1 A1: A1: 19 This information in the annual reports has been prepared in a form consistent with that which will be adopted in Eclipse 2 s next published annual financial statements (if the Eclipse 2 Scheme is not effected) having regard to accounting standards and policies and legislation applicable to those financial statements. The reports also include operating/financial reviews as follows: Description 2010 Annual Report 2011 Annual Report 2012 Annual Report 2012 Half-Yearly Report Objectives Page 20 Page 23 Page 22 Page n/a Financial Highlights Page 5 Page 4 Page 1 Page 5 Chairman s Statement Page 6 Page 5 Page 5 Page 6 Manager s Report Page 8 Page 8 Page 8 Page n/a Portfolio Summary Page 10 Page 11 Page 10 Page 9 Investment Policy Page 20 Page 23 Page 22 Page 6 Valuation Policy Page 11 Page 13 Page 12 Page n/a A1: 20.7 A1: 9.1 A1: A1: 3.1 A1: 20.1 A1: A1: 19 46

47 Eclipse 3 Description 2009 Annual Report 2010 Annual Report 2011 Annual Report 2012 Half-Yearly Report Balance Sheet Page 33 Page 34 Page 46 Page 14 Income Statement (or equivalent) Page 31 Page 32 Page 43 Page 12 Statement showing all changes in equity (or equivalent note) Page 32 Page 33 Page 45 Page 13 Cash Flow Statement Page 34 Page 35 Page 47 Page 15 Accounting Policies and Notes Page 35 Page 37 Page 49 Page 17 Auditors Report Page 29 Page 30 Page 41 Page n/a A1: 20.7 A1: 9.1 A1: A1: 3.1 A1: 20.1 A1: A1: 19 This information in the annual reports has been prepared in a form consistent with that which will be adopted in Eclipse 3 s next published annual financial statements (if the Eclipse 3 Scheme is not effected) having regard to accounting standards and policies and legislation applicable to those financial statements. The reports also include operating/financial reviews as follows: Description 2009 Annual Report 2010 Annual Report 2011 Annual Report 2012 Half-Yearly Report Objectives Page 17 Page 16 Page 24 Page 4 Financial Highlights Page 2 Page 3 Page 4 Page 5 Chairman s Statement Page 3 Page 4 Page 5 Page 6 Manager s Report Page 5 Page 6 Page 8 Page n/a Portfolio Summary Page 6 Page 7 Page 11 Page 9 Investment Policy Page 17 Page 16 Page 24 Page 4 Valuation Policy Page 42 Page 37 Page 49 Page n/a A1: 20.7 A1: 9.1 A1: A1: 3.1 A1: 20.1 A1: A1: 19 Eclipse 4 Description 2009 Annual Report 2010 Annual Report 2011 Annual Report 2012 Half-Yearly Report Balance Sheet Page 33 Page 34 Page 46 Page 14 Income Statement (or equivalent) Page 31 Page 32 Page 43 Page 12 Statement showing all changes in equity (or equivalent note) Page 32 Page 33 Page 45 Page 13 Cash Flow Statement Page 34 Page 35 Page 47 Page 15 Accounting Policies and Notes Page 35 Page 37 Page 49 Page 17 Auditors Report Page 29 Page 30 Page 41 Page n/a A1: 20.7 A1: 9.1 A1: A1: 3.1 A1: 20.1 A1: A1: 19 This information in the annual reports has been prepared in a form consistent with that which will be adopted in Eclipse 4 s next published annual financial statements (if the Eclipse 4 Scheme is not effected) having regard to accounting standards and policies and legislation applicable to those financial statements. 47

48 The reports also include operating/financial reviews as follows: Description 2009 Annual Report 2010 Annual Report 2011 Annual Report 2012 Half-Yearly Report Objectives Page 17 Page 16 Page 24 Page 4 Financial Highlights Page 2 Page 3 Page 4 Page 5 Chairman s Statement Page 3 Page 4 Page 5 Page 6 Manager s Report Page 5 Page 6 Page 8 Page n/a Portfolio Summary Page 6 Page 7 Page 11 Page 9 Investment Policy Page 17 Page 16 Page 24 Page 4 Valuation Policy Page 42 Page 37 Page 49 Page n/a A1: 20.7 A1: 9.1 A1: A1: 3.1 A1: 20.1 A1: A1: 19 48

49 PART VII PRO FORMA FINANCIAL INFORMATION ACCOUNTANT S REPORT ON THE PRO FORMA FINANCIAL INFORMATION The Directors Octopus Eclipse VCT plc 20 Old Bailey London EC4M 7AN A1: A1: 20.2 Matrix Corporate Capital LLP One Vine Street London W1J 0AH 28 September 2012 Dear Sirs Octopus Eclipse VCT plc ( the Company ) We report on the pro forma financial information ( the pro forma financial information ) set out in Part VII of the prospectus dated 28 September 2012 ( Prospectus ), which has been prepared on the basis described, for illustrative purposes only, to provide information about how the Schemes (as defined in the Prospectus), the Enhanced Buyback Facility (as defined in the Prospectus) and the payment of the proposed Special Dividends (as defined in the Prospectus) might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the half-yearly report for the six month period ended 31 January This report is required by paragraph 20.2 of Annex I of the Commission Regulation (EC) 809/2004 and is given for the purpose of complying with that item and for no other purpose. Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with paragraph 23.1 of Annex Ito the Commission Regulation (EC) 809/2004, consenting to its inclusion in the Prospectus. Responsibilities It is the responsibility of the directors of the Company to prepare the pro forma financial information in accordance with item 20.2 of Annex I of the Commission Regulation (EC) 809/2004. It is our responsibility to form an opinion, as required by item 7 of Annex II of the Prospectus Directive Regulation, as to the proper compilation of the pro forma financial information and to report that opinion to you. In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue. Basis of Opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the pro forma financial information with the directors of the Company. We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company. 49

50 Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices. Opinion In our opinion: A2.7. the pro forma financial information has been properly compiled on the basis stated; and. such basis is consistent with the accounting policies of the Company. Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with paragraph 1.2 of Annex I of the Commission Regulation (EC) 809/2004. A3: 10.3 Yours faithfully Scott-Moncrieff 50

51 PRO FORMA FINANCIAL INFORMATION The following pro forma financial information on the Company has been prepared for illustrative purposes only, to show the impact of the Schemes, the Enhanced Buyback Facility and the payment of the proposed Special Dividends on the Company s unaudited net assets as at 31 January 2012 on the basis that the Schemes and the acquisition of the investment portfolio and all of the other assets and liabilities of the Target VCTs by the Company had been completed and the Enhanced Buyback Facility had been fully subscribed on that date. This pro forma financial information has been prepared in a manner consistent with the accounting policies of the Company and the Target VCTs as adopted in their last published accounts. The pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and, therefore, does not represent the Company s actual financial position or results: Adjustments A2: 1 A2: 2 A2: 4 A2: 5 Company ( 000) (Note 1) Acquisition of the assets and liabilities of Eclipse 2 ( 000) (Note 2) Acquisition of the assets and liabilities of Eclipse 3 ( 000) (Note 2) Acquisition of the assets and liabilities of Eclispse 4 ( 000) (Note 2) Enhanced Buyback Expenses Facility and of the Offer Schemes adjustments ( 000) ( 000) (Note 3) (Note 4) Special Dividends ( 000) (Note 5) Enlarged Company pro forma ( 000) (Note 5) Investments (at fair value) 11,877 6,551 9,162 9,162 36,752 Debtors Other current assets 2,367 3,123 4,102 4,114 13,706 Cash at bank and in hand 3, ,590 Creditors: amounts falling due within one year (302) (194) (207) (201) (388) (1,013) (9,274) (11,579) Net current assets 6,091 3,384 4,125 4,146 (388) (1,013) (9,274) 7,071 Net assets 17,968 9,935 13,287 13,308 (388) (1,013) (9,274) 43,823 Notes: A3: The financial information on the Company has been extracted without material adjustment from the Company s unaudited Half-Yearly Report for the six month period ended 31 January 2012 as incorporated into this Prospectus in Part VI of this document. 2. The acquired assets and liabilities of the Target VCTs are the assets and liabilities of the Target VCTs as extracted without material adjustment from the unaudited half-yearly reports for the six months ended 31 July 2012 (in respect of Eclipse 2) and 31 January 2012 (in respect of Eclipse 3 and Eclipse 4) as incorporated into this Prospectus in Part VI of this document. 3. Total costs of approximately 387,500 (inclusive of VAT) are expected to be incurred in relation to the Schemes and will be borne by all the Companies by their respective merger net assets (ignoring merger costs). A2: 3 A2: 6 4. No additional funds will be raised through the Enhanced Buyback Facility. Based on the illustrative merger calculations set out in Part II of this document, the latest NAV of a Share as at 31 July 2012 (adjusted for the Special Dividend) and assuming the Enhanced Buyback Facility is fully subscribed, the costs of the Enhanced Buyback Facility, ignoring initial and annual trail commission, is expected to be a maximum of 1,012, On the assumption that all Schemes become effective, the Companies will pay the Special Dividends which, based on the issued share capital of the Companies as at 27 September 2012 (this being the latest practicable date prior to publication of this document), would amount to 3,530,066 (in respect of the Company), 1,673,441 in respect of Eclipse 2, 2,034,327 in respect of Eclipse 3 and 2,035,268 in respect of Eclipse The pro forma statement of net assets of the Company does not take account of any transactions of the Companies or other changes in the value of the assets and liabilities of the Companies (other than Eclipse 2) since 31 January 2012 and since 31 July 2012 in respect of Eclipse The Schemes and the Enhanced Buyback Facility are together expected to have an earning enhancing impact on the earnings of the Company had they occurred on 1 February

52 PART VIII INVESTMENT PORTFOLIOS AND PRINCIPAL INVESTMENTS OF THE COMPANY AND THE TARGET VCTS The following unaudited information represents all the investments of the Company and the Target VCTs as at the date of this document. Investment information (being investment amounts, holdings and valuations) in this Part VIII has been sourced from the Company s and the Target VCT s unaudited management accounts for the period to 31 July 2012 and Eclipse 2 s half-yearly report for the six month period ended 31 July In respect of the information on investee companies sales, profits and losses and net assets, these have been taken from the latest financial year end accounts published by those investee companies as referred to in this Part VIII. The information on the investee companies is, for the purpose of this paragraph, Third Party Information. The Third Party Information has been accurately reproduced and, as far as the Company is aware and is able to ascertain from information published by those third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. The valuations as at 31 July 2012 set out in this Part VIII are the most recent valuations by the Companies. There has been no material change to the portfolios between 31 July 2012 and the date of this document. A15: 8.2 A1: A1: 23.2 A3: 10.4 Investments Company Eclipse 2 Eclipse 3 Eclipse 4 Unquoted Investments Value % Value % Value % Value % Hydrobolt Group Limited 792, , ,813, ,813, Project Tristar Limited 645, , ,952, ,952, The History Press Limited 1,245, , ,226, ,226, Luther Pendragon Holdings Limited 1,380, ,380, The Kendal Group Limited 984, , CSL Dualcom Group Limited 357, , , , Reading Room Limited 926, Bruce Dunlop Associates Limited 80, , , , First Sports Group Limited 395, , TDX Group Limited 617, Artesian Solutions Limited 150, , , , Lilestone Holdings Limited 188, , , , T4 Media Limited 33, , , , Brandspace (London) Limited - PPL Realisations 2011 limited (previously Perfect Pizza) - Sweet Cred Holdings Limited - Quoted Investments Plastics Capital plc 934, , , , Convivial London Pubs plc 541, , , , Vertu Motors plc 113, , , , Hasgrove plc 104, , , , InterQuest plc 235, , Cohort plc 96, , , , Brulines Holdings plc 80, , , , Tanfield Group plc 88, , , , Zetar plc 256, Autoclenz Holdings plc 81, , , , Cello Group plc 122, Augean plc 97, Total fixed asset investments 10,544, ,549, ,870, ,870, Current asset investments 2,716, ,123, ,656, ,678, Cash at bank 2,779, , ,642, ,630, Debtors 7, , , , Gross assets 16,047, ,127, ,188, ,197,

53 Largest Investments of the Company and Target VCTs Set out below are further details of the largest fixed asset investments of the Company and the Target VCTs representing more than 50% of the gross assets of each of the Company and the Target VCTs (including investments representing 5% of each of the gross assets of each of the Company and Target VCTs) as at the date of this document. Hydrobolt Group Limited Hydrobolt is a manufacturer and supplier of special fasteners and petro-chemical grade studbolts. It differentiates itself by its quality of service, flexibility and full traceability of its products, which are often a small but critical part of a large machine or assembly in the oil and gas market. Accounts for the year ended 31 March 2012 Profit before tax 1,202,000 Retained profit 1,711,000 Net assets 2,843,000 Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , , Loan stock n/a 356, , Eclipse 2 Equity , , Loan stock n/a 231, , Eclipse 3 Equity ,843 1,547, Loan stock n/a 1,265,575 1,265, Eclipse 4 Equity ,843 1,547, Loan stock n/a 1,265,575 1,265,

54 Project Tristar Limited Tristar is one of the world s leading chauffeur companies, carrying over 500,000 passengers for 400 clients in the last year alone. The business operates in 70 countries with its own vehicles in the UK and the US and has a newly opened and rapidly expanding service in Hong Kong. It has a blue chip customer base which includes Virgin, Emirates, BP, Goldman Sachs and many other leading multinationals. Accounts for the year ended 31 May 2011 Profit before tax 372,000 Retained profit 494,000 Net assets 2,180,000 Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , , Loan stock n/a 296, , Eclipse 2 Equity , , Loan stock n/a 400, , Eclipse 3 Equity ,596 1,054, Loan stock n/a 897, , Eclipse 4 Equity ,596 1,054, Loan stock n/a 897, , The History Press Limited The History Press is the UK market leading publisher of distinctive local interest history books. It has operations in France, Germany, Ireland, Belgium and the US. The Group houses four main imprints: Pitkin, Phillimore, Spellmount and The History Press. Accounts for the year ended 31 December 2010 Loss before tax (960,000) Retained loss (4,369,000) Net liabilities (3,822,000) Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , Loan stock n/a 2,244,473 1,245, Eclipse 2 Equity , Loan stock n/a 1,409, , Eclipse 3 Equity , Loan stock n/a 2,203,552 1,226, Eclipse 4 Equity , Loan stock n/a 2,203,552 1,226,

55 Luther Pendragon Holdings Limited Luther Pendragon is one of the UK s leading independent communications consultancies. The company has more than 40 qualified consultants managing corporate communications, public affairs, media relations and crisis and stakeholder communications. The business has offices in London and Brussels and affiliates across the world. Accounts for the year ended 31 December 2010 Loss before tax (50,243) Retained profit 1,075,867 Net assets 2,661,420 Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , , Loan stock n/a 875, , Eclipse 2 Equity , , Loan stock n/a 875, , Eclipse 3 Equity Loan stock n/a 0.0 Eclipse 4 Equity Loan stock n/a 0.0 Plastics Capital plc AIM-quoted Plastics Capital plc is a specialist manufacturer of plastic components, often with specific applications, with customers worldwide and in a wide range of industries. Accounts for the year ended 31 March 2012 Profit before tax 1,499,000 Retained profit 2,212,000 Net assets 19,447,000 Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , , Loan stock n/a 0.0 Eclipse 2 Equity , , Loan stock n/a 0.0 Eclipse 3 Equity , , Loan stock n/a 0.0 Eclipse 4 Equity , , Loan stock n/a

56 The Kendal Group Limited The Kendal Group is a branded consumer goods company, owning the Zoggs brand of swimwear, swim equipment and active wear. The company designs a product, has it manufactured in Europe and the Far East and sells to retail outlets, on-line, leisure centres and through distribution agreements overseas. The company has offices in the UK and Australia. Accounts for the year ended 31 March 2011 Profit before tax 1,413,498 Retained profit 667,749 Net assets 1,882,695 Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , , Loan stock n/a 101, , Eclipse 2 Equity , , Loan stock n/a 57,008 57, Eclipse 3 Equity Loan stock n/a 0.0 Eclipse 4 Equity Loan stock n/a 0.0 CSL Dualcom Group Limited Dualcom is the UK s leading supplier of dual path signalling devices which link burglar alarms to the police or a private security firm. The devices communicate using a telephone line or broadband connection and a wireless link from Vodafone, which has been a partner since CSL DualCom has developed a number of new products which have enabled the business to steadily grow its market share of new connections and its profitability since the initial investment, most recently by expanding into Ireland. Accounts for the year ended 31 March 2012 Loss before tax (107,895) Retained loss (120,718) Net assets 21,176,833 Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity 0.0% 0.00% Loan stock n/a 357, , % Eclipse 2 Equity 0.0% 0.00% Loan stock n/a 199, , % Eclipse 3 Equity 0.0% 0.00% Loan stock n/a 313, , % Eclipse 4 Equity 0.0% 0.00% Loan stock n/a 313, , % 56

57 Reading Room Limited Reading Room is a leading web design agency with offices in London, Manchester, Sydney, Canberra and Brisbane. It provides online brand strategy, web design, content management system development and usability testing. Accounts for the year ended 31 March 2011 Profit before tax 59,888 Retained profit 745,468 Net assets 1,509,102 Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , , Loan stock n/a 200, , Eclipse 2 Equity Loan stock n/a 0.0 Eclipse 3 Equity Loan stock n/a 0.0 Eclipse 4 Equity Loan stock n/a 0.0 First Sports Group Limited First Sports Group ( First ) is the largest sports retail service provider to the UK Private Health and Fitness Club market with more than 370 outlets nationwide. Through a unique combination of 29 Pro-shops and 345Cubes, First sells a wide range of sports equipment and sportswear, including brands such as Nike, Adidas, O Neill, Speedo, Zoggs, Wilson and Prince. A Pro-shop is a retail shop within a health club and a Cube is a lockable selfservice display unit sited close to the reception desk where a customer pays. Accounts for the year ended 31 March 2011 Loss before tax (1,685,330) Retained loss (6,341,660) Net liabilities (4,641,450) Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , Loan stock n/a 1,630, , Eclipse 2 Equity , Loan stock n/a 1,630, , Eclipse 3 Equity Loan stock n/a 0.0 Eclipse 4 Equity Loan stock n/a

58 Convivial London Pubs plc The company was incorporated in December 2003 to acquire and operate freehold or long leasehold free-of-tie, wet-led managed pubs in the Greater London area. The pubs are non-branded, un-themed and cater for their own local markets. Accounts for the year ended 1 October 2011 Profit before tax 473,726 Retained profit (3,117,299) Net assets (12,018,434) Equity percentage (%) Accounting cost Percentage of gross assets (%) Valuation Company Equity , , Loan stock n/a 0.0 Eclipse 2 Equity , , Loan stock n/a 0.0 Eclipse 3 Equity , , Loan stock n/a 0.0 Eclipse 4 Equity , , Loan stock n/a

59 PART IX TAX POSITION OF SHAREHOLDERS OF THE COMPANY AND TARGET VCTS The following paragraphs apply to the Company and to persons holding Shares as an investment who are the absolute beneficial owners of such Shares and are resident in the UK. They may not apply to certain classes of persons, such as dealers in securities. The following information is based on current UK law and practice, is subject to changes therein, is given by way of general summary and does not constitute legal or tax advice. If you are in any doubt about your position, or if you may be subject to a tax in a jurisdiction other than the UK, you should consult your independent financial adviser. The Schemes 1. Shareholders The implementation of the Schemes will not affect the VCT status of the Company as a VCT or the reliefs obtained by Shareholders on subscription for existing Shares. Although the Company will be required to pay UK stamp duty or stamp duty reserve tax on the transfer to it of the assets and liabilities of the Target VCTs (which form part of the estimated merger costs being allocated to the Company and the Target VCTs), no UK stamp duty or stamp duty reserve tax will be payable directly by Shareholders as a result of the implementation of the Scheme. 2. Target VCTs Shareholders The effective exchange of Target VCTs Shares for New Shares will not constitute a disposal of such shares for the purposes of UK taxation. Instead, the new holding of New Shares will be treated as having been acquired at the same time and at the same cost as the existing Target VCTs Shares from which they are derived. Any capital gains tax deferral relief obtained on subscription of the existing Target VCTs Shares will not, therefore, be crystallised for payment, but will be transferred to the New Shares. For Target VCTs Shareholders holding (together with their associates) more than 5% in the share capital of any one of the Target VCTs, clearance has been obtained from HMRC in terms of Section 138 of TCGA 1992 that the treatment described above for persons who (together with their associates) own less than 5% of the share capital of any one of the Target VCTs will also apply to them. Dissenting Target VCTs Shareholders whose holdings are purchased for cash at the break value price shall be treated as having disposed of their existing Target VCT shares. The Target VCTs should still be able to claim the benefit of VCT status and the dissenting Target VCTs Shareholders should not be subject to any UK taxation in respect of any capital gains arising on disposal. However, the purchase of their holdings by the Liquidators will constitute a disposal in the Target VCTs and a dissenting Target VCT shareholder will be liable to pay any capital gains tax for which such dissenting Target VCT shareholder obtained deferral relief on subscription. If dissenting Target VCTs Shareholders have disposed of their shares within the holding period required to retain upfront tax relief, income tax relief on those subscriptions will also be repayable. 3. HMRC Clearances Clearance has been obtained from HMRC in respect of the Schemes under Section 701 ITA 2007 and Section 138 TCGA With regard to the former, the receipt of New Shares should not, except in the case of dealers, fail to be regarded as an income receipt for the purposes of UK taxation. Clearance has also been obtained from HMRC that the Schemes meet the requirements of the Merger Regulations and as such the receipt by Target VCTs Shareholders of New Shares should not prejudice tax reliefs obtained by Shareholders on existing Shares in the Company and should not be regarded as a disposal. 4. Overseas Shareholders Shareholders not resident in the UK should seek their own professional advice as to the consequences of making and holding an investment in a VCT as they may be subject to tax in other jurisdictions as well as in the UK. 59

60 The Enhanced Buyback Facility The tax reliefs set out below are those currently available to individuals aged 18 or over who subscribe for New Shares under the Enhanced Buyback Facility and will be dependent on personal circumstance. Whilst there is no specific limit on the amount of an individual s acquisition of shares in a VCT, tax reliefs will only be given to the extent that the total of an individual s subscriptions or other acquisitions of shares in VCTs in any tax year do not exceed 200,000. Qualifying Investors who intend to invest more than 200,000 in VCTs in any one tax year should consult their professional advisers. 1. General VCT Tax Reliefs (a) Income tax (i) Relief from income tax on investment A Qualifying Investor subscribing for New Shares will be entitled to claim income tax relief on amounts subscribed up to a maximum of 200,000 invested in VCTs in any tax year. To obtain relief a Qualifying Investor must subscribe on their own behalf although the New Shares may subsequently be transferred to a nominee. The relief is given at the rate of 30% on the amount subscribed regardless of whether the Qualifying Investor is a higher rate, additional rate or basic rate tax payer, provided that the relief is limited to the amount which reduces the Qualifying Investor s income tax liability to nil. Investments to be used as security for or financed by loans may not qualify for relief, depending on the circumstances. (ii) Dividend relief A Qualifying Investor, who acquires shares in VCTs in any tax year costing up to a maximum of 200,000, will not be liable to income tax on dividends paid on those shares and there is no withholding tax thereon. (iii) Purchases in the market A Qualifying Investor who purchases existing shares in the market will be entitled to claim dividend relief (as described in paragraph 1(a)(ii) above) but not relief from income tax on the investment (as described in paragraph 1(a)(i) above). (iv) Withdrawal of relief Relief from income tax on a subscription for VCT shares (including New Shares) will be withdrawn if the VCT shares are disposed of (other than between spouses or on death) within five years of issue or if the VCT loses its approval within this period as detailed below. Dividend relief ceases to be available once the Qualifying Investor ceases to own VCT shares in respect of which it has been given or if the VCT loses its approval within this period as detailed below. (b) (i) Capital gains tax Relief from capital gains tax on the disposal of VCT shares A disposal by a Qualifying Investor of VCT shares will give rise to neither a chargeable gain nor an allowable loss for the purposes of UK capital gains tax. The relief is limited to the disposal of VCT shares acquired within the limit of 200,000 for any tax year. (ii) Purchases in the market An individual purchaser of existing shares in the market will be entitled to claim relief from capital gains tax on disposal (as described in paragraph b(i) above). (c) Loss of VCT approval For a company to be fully approved as a VCT it must meet the various requirements for full approval as set out below. If a company which has been granted approval as a VCT subsequently fails to comply with the conditions for approval, approval as a VCT may be withdrawn. In these circumstances, relief from income tax on the initial investment is repayable unless loss of approval occurs more than five years after the issue of the relevant VCT shares. In addition, relief ceases to be available on any dividend paid 60

61 in respect of profits or gains in any accounting period ending when VCT status has been lost and any gains on the VCT shares up to the date from which loss of VCT status is treated as taking effect will be exempt, but gains thereafter will be taxable. (d) Overseas investors Investors not resident in the UK should seek professional advice as to the consequences of making an investment in a VCT or in the UK generally. 2. Tax Consequences of the Enhanced Buyback Facility (a) Disposal of Existing Shares by Shareholders The purchase of Existing Shares by the Company will be treated, for tax purposes, as a disposal. (i) Income tax consequences The disposal is treated as a repayment of the amount subscribed for each Existing Share. To the extent that the proceeds of the disposal are greater than the amount subscribed for on each Existing Share, the Company will be treated as having made a distribution of the amount of the excess (if any). This amount of excess is a distribution received by a Shareholder which is subject to income tax. The Tender Price of an Existing Share, based on the latest published net asset values as at 31 July 2012 of the Shares would be 38.4p. Shareholders will be subject to an income tax charge on any excess of the Tender Price that is above the original issue price of the Shares that are bought back. A disposal of Existing Shares which have not been held for the minimum five year holding period will be subject to clawback by HMRC of any upfront income tax reliefs obtained on original subscription. (ii) Capital gains tax consequences If a Shareholder qualifies for VCT reliefs in respect of the Existing Shares sold, the disposal will give rise to neither a chargeable gain nor an allowable loss for the purposes of capital gains tax. In respect of other Existing Shares, capital gains tax could be payable where shares were acquired from a previous shareholder (rather than having been subscribed for directly from the Company). If the participating Shareholder acquired the Existing Shares for an amount (the Acquisition Price ) less than their subscription price, the part of the Tender Price in excess of the Acquisition Price up to the subscription price will be subject to capital gains tax. If the Tender Price for Existing Shares, which do not qualify for the capital gains tax disposal exemption, is less than the Acquisition Price for those shares, Shareholders should be entitled to an allowable loss. Where Shareholders acquired Existing Shares on more than one occasion Existing Shares acquired earlier are treated as having been disposed of prior to Existing Shares acquired later (ie first in, first out). (iii) Stamp duty No stamp duty is payable by Shareholders in respect of the Existing Shares sold or the New Shares subscribed. The Company will pay stamp duty at the rate of 0.5% of the aggregate amount paid for Existing Shares purchased from a Shareholder under the Enhanced Buyback Facility (rounded up to the nearest 5). (b) Subscription for New Shares by Shareholders and HMRC confirmation HMRC have confirmed that usual VCT tax reliefs, including the upfront income tax relief, will be available on the New Shares issued pursuant to the Enhanced Buyback Facility. 3. Obtaining Tax Reliefs The Company will provide to each Qualifying Investor a certificate which the Qualifying Investors may use to claim income tax relief, either by obtaining from HMRC an adjustment to their tax coding under the PAYE system or by waiting until the end of the tax year and using their tax return to claim relief. 61

62 4. Overseas Shareholders Shareholders not resident in the UK should seek their own professional advice as to the consequences of making and holding an investment in a VCT as they may be subject to tax in other jurisdictions as well as in the UK. 62

63 PART X TAX POSITION OF THE COMPANY 1. Qualification as a VCT To qualify as a VCT, a company must be approved as such by HMRC. To obtain such approval it must: (a) (b) (c) (d) (e) (f) (g) (h) not be a close company; have each class of its ordinary share capital listed on a regulated market; derive its income wholly or mainly from shares or securities; have at least 70% by VCT Value of its investments in shares in Qualifying Investments, 30% of which must be eligible shares (70% for funds raised after 5 April 2011); have at least 10% by VCT Value of each Qualifying Investment in eligible shares; not have more than 15% by VCT Value of its investments in a single company or group (other than a VCT or a company which would, if its shares were listed, qualify as a VCT); not retain more than 15% of its income derived from shares and securities in any accounting period; and not invest in a single company or group in excess of the annual limit. The term eligible shares means ordinary shares which do not carry any rights to be redeemed or a preferential right to assets on a winding-up or dividends (in respect of the latter, where the right to the dividend is cumulative or, where the amount or dates of payment of the dividend may be varied by the company, a shareholder or any other person). 2. Qualifying Investments A Qualifying Investment consists of shares or securities first issued to the VCT (and held by it ever since) by a company satisfying the conditions set out in Chapters 3 and 4 of Part 6 of ITA The conditions are detailed, but include that the company must be a Qualifying Company, have gross assets not exceeding 15 million immediately before and 16 million immediately after the investment, apply the money raised for the purposes of a qualifying trade within certain time periods, cannot be controlled by another company, have fewer than 250 full-time (equivalent) employees and at the time of investment do not obtain more than 5 million of investment from state aided risk capital measures in any rolling 12 month period. In certain circumstances, an investment in a company by a VCT can be split into a part which is a qualifying holding and a part which is a non-qualifying holding. 3. Qualifying Companies A Qualifying Company must be unquoted (for VCT purposes this includes companies whose shares are traded on PLUS and AIM) and must carry on a qualifying trade. For this purpose certain activities are excluded (such as dealing in land or shares or providing financial services). The qualifying trade must either be carried on by, or be intended to be carried on by, the Qualifying Company or by a qualifying subsidiary at the time of the issue of shares or securities to the VCT (and at all times thereafter). The company must have a permanent establishment in the UK, but the company need not be UK resident. A company intending to carry on a qualifying trade must begin to trade within two years of the issue of shares or securities to the VCT and continue it thereafter. A Qualifying Company may have no subsidiaries other than qualifying subsidiaries which must, in most cases, be at least 51% owned. 4. Approval as a VCT A VCT must be approved at all times by HMRC. Approval has effect from the time specified in the approval. A VCT cannot be approved unless the tests detailed above are met throughout the most recent complete accounting period of the VCT and HMRC is satisfied that they will be met in relation to the accounting period of the VCT which is current when the application is made. However, where a VCT raises further 63

64 funds, VCTs are given grace periods to invest those funds before such further funds become subject to the tests. However, to aid the launch of a VCT, HMRC may give provisional approval if satisfied that conditions (b), (c), (f) and (g) in paragraph 1 above will be met throughout the current or subsequent accounting period and condition (d) in paragraph 1 above will be met in relation to an accounting period commencing no later than three years after the date of provisional approval. The Company has obtained approval as a VCT from HMRC. The Board considers that the Company has conducted its affairs and will continue to do so to enable it to qualify as a VCT. 5. Withdrawal of Approval Approval of a VCT (full or provisional) may be withdrawn by HMRC if the various tests set out above are not satisfied. The exemption from corporation tax on capital gains will not apply to any gain realised after the point at which VCT status is lost. Withdrawal of approval generally has effect from the time when notice is given to the VCT but, in relation to capital gains of the VCT only, can be backdated to not earlier than the first day of the accounting period commencing immediately after the last accounting period of the VCT in which all of the tests were satisfied. Withdrawal of provisional approval has effect as if provisional approval had never been given (including the requirement to pay corporation tax on prior gains). The above is only a summary of the conditions to be satisfied for a company to be treated as a VCT. 64

65 PART XI ADDITIONAL INFORMATION 1. The Company 1.1 The Company was incorporated and registered in England and Wales under CA 1985 as a public company with limited liability on 16 March 2004, with registered number and the name Eclipse VCT plc. The Company changed its name to Octopus Eclipse VCT plc on 12 November The principal legislation under which the Company operates is CA 2006 (and regulations made thereunder). The legal and commercial name of the Company is Octopus Eclipse VCT plc. The Company is not regulated by the FSA or an equivalent European Economic Area regulator, but it is subject to regulation by HMRC under the VCT rules in order to qualify as a VCT. 1.2 On 13 April 2004, the Registrar of Companies issued the Company with a trading certificate under Section 117 of CA 1985 (now Section 761 of CA 2006) entitling it to commence business. 1.3 The Company s registered office is at 20 Old Bailey, London EC4M 7AN. The Company is domiciled in England and does not have, nor has it had since incorporation, any subsidiaries or employees. 1.4 The Company revoked its status as an investment company under section 266 of CA 1985 (now section 833 of CA 2006) on 16 May Share Capital 2.1 The authorised share capital of the Company on incorporation was 5,000,000 divided into 49,500,000 ordinary shares of 10p each and 50,000 redeemable non-voting shares of 100p each. Resolution 1 to be proposed at the General Meeting will approve an amendment to the Articles to revoke the share capital limit now deemed contained in the Articles under CA To enable the Company to obtain a certificate under Section 117 of CA 1985 (now Section 761 of CA 2006), on 6 April 2004, 50,000 redeemable shares of 1 each were allotted by the Company at par for cash, paid up as to one quarter of their nominal value. Such redeemable shares were paid up in full on and redeemed in full out of the proceeds of the Company s public offer in The authorised but unissued shares so arising were automatically redesignated as ordinary shares of 10p each in the capital of Company. 2.3 On 13 September 2005, the Company passed a resolution approving, subject to the sanction of the High Court, the cancellation of the amount standing to the credit of the share premium account (such cancellation being subsequently confirmed by the High Court on 8 December 2005 and registered at Companies House on 12 December 2005). 2.4 As at 31 July 2011, the date to which the last audited accounts have been prepared, the issued share capital of the Company was 32,232,614 ( 3,223, nominal). As at 31 January 2012, the date to which the last unaudited Half-Yearly Report has been prepared, the issued share capital of the Company was 31,660,161 ( 3,166, nominal). 2.5 Since 31 January 2012, the Company has bought back 353,148 Shares and issued 784,500 Shares. 2.6 As at 27 September 2012 (this being the latest practicable date prior to publication of this document) the Company had 32,091,513 Shares ( 3,209, nominal) in issue (all fully paid up) and no share or loan capital of the Company was under option or had been agreed, conditionally or unconditionally, to be put under option, nor did the Company hold any share capital in treasury. 2.7 The following resolutions were passed at the annual general meeting of the Company held on 14 December 2011: that the directors be generally and unconditionally authorised in accordance with section 551 of CA 2006 to allot shares up to a maximum nominal amount of 322,326 (representing approximately 10% of the ordinary share capital in issue at that date) this authority to expire at the later of the conclusion of the Company s annual general meeting next following the passing of this resolution and the expiry of 15 months from the passing of the resolution (unless previously revoked, varied or A15: 1.3 A3: 4.2 A1: A3: 4.6 A1: A1:

66 extended by the Company in general meeting but so that such authority allows the Company to make offers or agreements before the expiry thereof which would or might require relevant securities to be allotted after the expiry of such authority); that the directors be empowered pursuant to Section 571 of CA 2006 to allot or make offers or agreements to allot equity securities (as defined in Section 560(1) of CA 2006) for cash pursuant to the authority conferred by the resolution in paragraph above as if Section 561(1) of CA 2006 did not apply to any such allotments, and so that: (a) (b) reference to allotment in this resolution shall be construed in accordance with s560(2) of CA 2006; and the power conferred by this resolution shall enable the Company to make any offer or agreement before the expiry of the said power which would or might require equity securities to be allotted after the expiry of the said power and the Directors may allot equity securities in pursuance of such offer or agreement notwithstanding the expiry of such power; and this power, unless previously varied, revoked or renewed, shall come to an end at the conclusion of the annual general meeting of the Company next following the passing of this resolution or, if earlier, on the expiry of 15 months from the passing of this resolution; and that, the Company be and is generally and unconditionally authorised to make market purchases (within the meaning of Section 693(4) of CA 2006) of ordinary shares of 10p each in the Company provided that: (a) the maximum number of ordinary shares so authorised to be purchased shall not exceed 5% of the present issued ordinary share capital of the Company; (b) the minimum price which may be paid for an ordinary share shall be 10p; (c) (d) (e) the maximum price, exclusive of expenses, which may be paid for an ordinary share is an amount equal to 105% of the average of the middle market quotations for an ordinary share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the ordinary share is contracted to be purchased; the authority conferred comes to an end at the conclusion of the next annual general meeting of the Company or upon the expiry of 15 months from the passing of this resolution, whichever is the later; and that the Company may enter into a contract to purchase its ordinary shares under this authority prior to the expiry of this authority which would or might be completed wholly or partly after the expiry of the authority. 2.8 The following resolutions of the Company will be proposed at the General Meeting of the Company to be held on 23 October 2012: That, the existing Articles of the Company be amended by revoking all of the provisions which, by virtue of paragraph 42 of Schedule 2 of The Companies Act 2006 (Commencement No 8 Transitional Provisions and Savings) Order 2008, are treated as provisions of its Articles That, subject to the Eclipse 2 Scheme becoming unconditional: (a) (b) the acquisition of the assets and liabilities of Eclipse 2 on the terms set out in the Circular be and hereby is approved; and the directors of the Company be and hereby are generally and unconditionally authorised in accordance with Section 551 of CA 2006 to exercise all the powers of the Company to allot shares in the capital of the Company up to an aggregate nominal amount of 3,000,000 in connection with the Eclipse 2 Scheme, provided that the authority conferred shall expire on the date falling 18 months from the date of the passing of this resolution (unless renewed, varied or revoked by the Company in a general meeting) That, subject to the Eclipse 3 Scheme becoming unconditional: (a) (b) the acquisition of the assets and liabilities of Eclipse 3 on the terms set out in the Circular be and hereby is approved; and in addition to the authorities conferred by the resolution set out at paragraph above, the directors of the Company be and hereby are generally and unconditionally authorised in 66

67 accordance with Section 551 of CA 2006 to exercise all the powers of the Company to allot shares in the capital of the Company up to an aggregate nominal amount of 3,750,000 in connection with the Eclipse 3 Scheme, provided that the authority conferred shall expire on the date falling 18 months from the date of the passing of this resolution (unless renewed, varied or revoked by the Company in a general meeting) That, subject to the Eclipse 4 Scheme becoming unconditional: (a) the acquisition of the assets and liabilities of Eclipse 4 on the terms set out in the Circular be and hereby is approved; and (b) in addition to the authorities conferred by the resolution set out at paragraph and above, the directors of the Company be and hereby are generally and unconditionally authorised in accordance with Section 551 of CA 2006 to exercise all the powers of the Company to allot shares in the capital of the Company up to an aggregate nominal amount of 3,750,000 in connection with the Eclipse 4 Scheme, provided that the authority conferred shall expire on the date falling 18 months from the date of the passing of this resolution (unless renewed, varied or revoked by the Company in a general meeting) That in addition to the authorities the resolutions set out at paragraphs to above: (a) (b) (c) the Company be generally and unconditionally authorised pursuant to Section 701 of the Act to make market purchases (within the meaning of Section 693(4) of the Act) of its shares of up to such number of shares as represents 50% of the issued share capital of the Company at 5.00 p.m. on 1 November 2012 (or such later date as the directors may determine) at a fixed price equal to the latest published net asset value per share prior to the date of purchase (rounded down to the nearest 0.1p), which fixed price shall, for the purposes of Section 701 (3)(b) of the Act constitute both the maximum and minimum price that may be paid for the shares purchased pursuant to, or in contemplation of, an enhanced buyback facility; the directors be and hereby are generally and unconditionally authorised in accordance with Section 551 of the Act to exercise all powers of the Company to allot and issue shares in the capital of the Company up to such number of shares as represents 50% of the issued share capital of the Company at 5.00 p.m. on 1 November 2012 (or such later date as the directors may determine), provided that this power shall be limited to the allotment of shares at a price per share equal to the latest published net asset value of an existing share prior to the date of allotment and divided by 0.95 (rounded up to the nearest 0.1p), pursuant to, or in contemplation of, an enhanced buyback facility; the directors be and hereby are empowered pursuant to Section 570 and Section 573 of the Act to allot equity securities (within the meaning of Section 560 of the Act) for cash pursuant to the authority referred to at paragraph (b) above as if Section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of shares at a price per share equal to the latest published net asset value of an existing share prior to the date of allotment and divided by 0.95 (rounded up to the nearest 0.1p) pursuant to, or in contemplation of, an enhanced buyback facility and the authority and powers conferred by this resolution shall expire on the conclusion of the annual general meeting of the Company to be held in 2013, save that the Company may, before such expiry, make offers or agreements which would or might require shares to be allotted and purchased and the directors may allot and purchase shares in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired That in addition to the authorities set out at paragraphs to above: (a) the directors of the Company be and hereby are generally and unconditionally authorised in accordance with Section 551 of the Act to exercise all the powers of the Company to allot shares in the capital of the Company and to grant rights to subscribe for or to convert any security into shares in the capital of the Company up to an aggregate nominal amount of 2,700,000, provided that, the authority conferred shall expire on the conclusion of the annual general meeting of the Company to be held in 2013 (unless renewed, varied or revoked by the Company in a general meeting) but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require shares to be allotted or rights to be granted after such expiry; 67

68 (b) the directors of the Company be and hereby are empowered pursuant to Sections 570 and 573 of the Act to allot or make offers or agreements to allot equity securities (which expression shall have the meaning ascribed to it in Section 560(1) of the Act) for cash pursuant to the authority referred to at paragraph (a) above or by way of a sale of treasury shares, as if Section 561(1) of the Act did not apply to such allotment, provided that the power conferred shall expire on the conclusion of the annual general meeting of the Company to be held in 2013 (unless renewed, varied or revoked by the Company in a general meeting) and provided further that this power shall be limited to (i) the allotment and issue of shares up to an aggregate nominal value of 1,350,000 pursuant to offer(s) for subscription; and (ii) the allotment and issue of shares up to an aggregate nominal value of 10% of the issued share capital of the Company from time to time in each case where the proceeds may in whole or part be used to purchase shares; and (c) the Company be and hereby is empowered to make one or more market purchases within the meaning of Section 693(4) of the Act of its own shares (either for cancellation or for the retention as treasury shares for future re-issue or transfer) provided that: (i) the aggregate number of shares which may be purchased shall not exceed 20,236,500 shares; (ii) (iii) (iv) (v) the minimum price which may be paid per share is the nominal value thereof; the maximum price which may be paid per share is an amount equal to the higher of (i) 105% of the average of the middle market quotation per share (of the relevant class) taken from the London Stock Exchange daily official list for the five business days immediately preceding the day on which such share is to be purchased; and (ii) the amount stipulated by Article 5(1) of the Buy Back and Stabilisation Regulation 2003; the authority conferred shall expire on the conclusion of the annual general meeting of the Company to be held in 2013 (unless renewed, varied or revoked by the Company in general meeting); and the Company may make a contract to purchase shares under the authority conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of such shares That, the amount standing to the credit of the share premium account of the Company as at 28 September 2012 and the amounts credited to the share premium account of the Company pursuant to the issue of shares, or otherwise, in connection with the Schemes be and hereby are cancelled That the share premium account of the Company and the capital redemption reserve of the Company be and hereby are cancelled That the ordinary annual remuneration of the directors of the Company shall not exceed 95,000 in aggregate That the articles of association of the Company be amended by: (i) the deletion of article 5.1; (ii) (iii) the insertion of a new article in the following form the Company may change its name by resolution of the Board ; and subject to the passing of resolution 9 above, 75,000 in article being replaced with 95, Memorandum and Articles of Association In this paragraph 3, reference to Directors means the directors of the Company from time to time, reference to the Board means the board of directors of the Company from time to time. 68

69 Memorandum The Memorandum, which, by virtue of Section 28 of CA 2006, is now treated as being part of the Articles, provides that the Company s principal object and purpose is to carry on the business of a VCT. Articles The following defined terms shall apply in this section only:. Acts means the Companies Acts as defined in Section 2 of CA 2006; and. Statutes means CA 1985, CA 2006, the Uncertificated Securities Regulations 1995 (SI 1995 No 3272) and every other statute, statutory instrument, rule, order or regulation for the time being in force concerning companies and affecting the Company. The following is a summary of the current Articles. Pursuant to certain resolutions being proposed at the General Meeting of the Company, the Articles are subject to amendment as detailed accordingly in the summary below and/or referred to at paragraph 2.8 above. Statutory references are subject to as updated from time to time. A1: A1: A3: Uncertificated Shares (i) Notwithstanding anything in the Articles to the contrary, any shares in the Company may be issued, held, registered, converted to, transferred or otherwise dealt with in uncertificated form and converted from uncertificated form to certificated form in accordance with the Uncertificated Securities Regulations 1995 (SI 1995 No 3272) and practices instituted by the Operator of the relevant system. (ii) The Board may resolve that a class of shares is to become a participating security and may at any time determine that a class of shares shall cease to be a participating security. 3.2 Share Capital (i) The issued share capital of the Company shall not exceed 49,500,000 ordinary shares of 10p each and 50,000 redeemable shares of 1 each without the approval of the Company in general meeting. This article is proposed to be deleted pursuant to Resolution 9 being proposed at the General Meeting. (ii) (iii) (iv) (v) Subject to the provisions of the Statutes and without prejudice to the rights attaching to any existing shares or class of shares, any share may be issued with such preferred, deferred, or other special rights or such restrictions as the Company may from time to time by ordinary resolution determine or, if the Company has not so determined, as the Directors may determine (but so that no shares shall be issued by the Company carrying any present or future rights to dividend or to the Company s assets on a winding-up or to be redeemed or any other rights which would or might make any ordinary shares then in issue, or which might in the future be issued, ineligible for subscribers therefore to obtain tax reliefs pursuant to Schedule 15B of the Income and Corporation Taxes Act 1988 and/or Section 151A, 151B and Schedule 5C of the Taxes and Chargeable Gains Act 1992 (as amended from time to time)). Subject to the provisions of the Statutes and to any special rights for the time being attached to any existing shares, the Company may issue shares which are liable to be redeemed at the option of the Company or the shareholder on such terms and in such manner as the Articles provide. The Company may, with respect to any fully paid shares, issue a share warrant stating that the bearer of the share warrant is entitled to the shares specified in it and may provide (by coupons or otherwise) for the payment of future dividends on the shares included in a share warrant and the bearer of the share warrant shall be deemed to be a member for all purposes. Such powers may be exercised by the Board, which may determine and vary the conditions on which share warrants shall be issued. In connection with the issue of any shares the Company may exercise all powers of paying commission and brokerage conferred or permitted by the Acts. A1:

70 3.3 Call on, and forfeiture of, shares Subject to the terms of allotment of shares, the Board may from time to time make calls on members for monies unpaid on any shares. If any call or instalment of any call remains unpaid after the date for payment (being at least 14 clear days following the call) then the Board may, after giving not less than 14 clear days notice, forfeit such share and sell, re-allot or otherwise dispose of or transfer such forfeited shares on such terms as the Board may determine. Such forfeiture shall include all dividends declared or other monies payable in respect of the forfeited shares and not paid before the forfeiture. 3.4 Transfer of Shares (i) Form of Transfer All transfers of shares which are in certificated form may be effected by transfer in writing in any usual or common form or in any other form acceptable to the Directors and may be under hand only. The instrument of transfer shall be signed by or on behalf of the transferor and (except in the case of fully paid shares) by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register in respect thereof. (ii) Right to Refuse Registration (1) The Directors may decline to recognise an instrument of transfer relating to shares in certificated form unless the instrument of transfer is (a) in respect of only one class of share; (b) is in favour of not more than four transferees; and (c) is lodged at the registered office of the Company accompanied by the relevant share certificates and any other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer. (2) The Directors may, in the case of shares in certificated form, in their absolute discretion and without assigning any reason therefore, refuse to register any transfer of shares where the shares in question are not fully paid up where such refusal does not restrict dealings on an open and proper basis. 3.5 Alteration of Share Capital A1: (i) Increase, consolidation, cancellation and sub-division The Company may from time to time by ordinary resolution: (a) (b) consolidate and divide all or any of its share capital into shares of larger nominal amount than its existing shares; and subject to the provisions of the Statutes, sub-divide its shares or any of them into shares of smaller nominal value. (ii) Fractions If, as a result of any consolidation or subdivision of shares, any members would become entitled to fractions of a share, the Directors may deal with such fractions as they think fit. (iii) Reduction of capital Subject to the provisions of the Acts and to any rights for the time being attached to any shares, the Company may by special resolution reduce its share capital or any capital redemption reserve or share premium account or other undistributable reserve in any way. (iv) Purchase of own shares Subject to the provisions of the Acts and to any rights for the time being attached to any shares, the Company may purchase any of its own shares of any class. 3.6 Variation of Class Rights (i) If the share capital of the Company is divided into shares of different classes any of the rights for the time being attached to any class of shares in issue (whether or not the Company is being wound up) may be varied in such manner (if any) as may be provided by such rights or with the consent in writing of the holders of three-fourths of the issued shares of that class or 70

71 (ii) with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. All the provisions in the Articles as to general meetings shall mutatis mutandis apply to every meeting of the holders of any class of shares save that the quorum at every such meeting shall be not less than two persons holding or representing by proxy at least one-third of the issued shares of the class (excluding treasury shares); or at any adjourned meeting of such holders, one person holding shares of the class who is present in person or by proxy shall be a quorum. Every holder of shares of the class present in person or by proxy may demand a poll and each such holder shall be entitled to one vote for every share of the class held by him. 3.7 General Meetings (i) (ii) (iii) (iv) 3.8 Voting (i) Convening of General Meetings The Company shall within six months of its financial year end hold a general meeting as its Annual General Meeting. An annual general meeting and any general meeting at which it is proposed to pass a special resolution or (except as provided by the Statutes) a resolution of which special notice has been given to the Company, must be called by at least 21 days notice in writing and any other general meeting by at least 14 days notice in writing. The period of notice must in each case be exclusive of the day in which the notice is served or deemed to be served and of the day in which the meeting is to be held. Notice of General Meetings The notice calling a general meeting shall specify (a) (b) (c) (d) (e) whether the meeting is an annual general meeting or an extraordinary general meeting, the place, the day and the time of the meeting; the general nature of the business to be transacted; if the meeting is convened to consider a special or ordinary resolution, the intention to propose the resolution; and with reasonable prominence that a member entitled to attend, speak and vote is entitled to appoint one or more proxies to attend, speak and vote instead of him and that a proxy need not also be a member. Omission to Send Notice The accidental omission to send a notice of any meeting, or (where forms of proxy are sent out with notices) to send a form of proxy with a notice to any person entitled to receive the same, or the non-receipt of a notice of meeting or form of proxy by such a person, shall not invalidate the proceedings at the meeting. Quorum at General Meetings (1) No business shall be transacted at any general meeting unless a quorum is present. Two members present in person (or by representative) or by proxy and entitled to vote shall be a quorum, provided that if the Company has only one member, the quorum shall be one such person entitled to attend and to vote on the business to be transacted. (2) If within 15 minutes (or such longer period as the chairman may determine) from the time appointed for a meeting a quorum is not present or if during a meeting a quorum ceases to be present, the meeting, if convened on the requisition of members, shall be dissolved and in any other case shall stand adjourned to the same day in the next week and to such time and place as may be determined by the Chairman. Subject to the provisions of the Acts, to any special terms as to voting on which any shares may have been issued or may for the time being be held, and to any suspension or abrogation of voting rights pursuant to the Articles, at any general meeting every member who is present in person or by proxy or (being a corporation) represented by a duly authorised representative, not being himself a member shall on a show of hands have one vote and every member shall on a poll have one vote for each share of which he is the holder. A1:

72 (ii) (iii) (iv) If two or more persons are joint holders of a share, the vote of the senior who has tendered a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members of each company in respect of the holding. At any general meeting a resolution put to a vote of the meeting shall be decided on a show of hands, unless (before or on the declaration of the result of the show of hands) a poll is duly demanded. Subject to the provisions of the Acts, a poll may be demanded by: (a) (b) (c) (d) the chairman of the meeting; or by at least three members present in person or by proxy and entitled to vote at the meeting; or a member or members present in person or by proxy representing not less than onetenth of the total voting rights of all the members having the right to vote at the meeting; or member or members present in person or by proxy holding shares conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. No member shall, unless the Board otherwise determines, be entitled to vote at a general meeting or at any separate meeting of the holders of any class of shares, either in person or by proxy, or to exercise any other right or privilege as a member in respect of a share held by him unless and until all calls together with interest and expenses (if any) or other sums presently due and payable by him in respect of that share whether alone or jointly with any other person have been paid to the Company. 3.9 Failure to disclose interests in shares If any member, or any other person appearing to be interested in shares held by that member, has been served with a notice under Section 793 of CA 2006 in respect of such shares (or any further shares which are issued in respect of such default shares) ( default shares ) and is in default for a period of 14 days from the date of service of the notice in supplying to the Company the information thereby required, then the following restrictions shall apply to the default shares for a period specified by the Company (being a period ending not later than seven days after the earliest of compliance with the notice or receipt by the Company of notice that the shareholding has been sold to a third party pursuant to any arm s length transfer unless the Board otherwise determines): (a) (b) the holder of the default shares shall not be entitled to attend or vote on any question, either in person or by proxy, at any general meeting of the Company; and if the default shares represent at least 0.25% of the issued shares of the same class the holder of the default shares shall not be entitled to receive any dividend (including shares issued in lieu of dividend) or to transfer any of the shares (other than by way of an arm s length transfer) Untraced Members (i) The Company shall be entitled to sell at the best price reasonably obtainable any share of a member, or any share to which a person is entitled by virtue of transmission or otherwise by operation of law, if and provided that: (a) (b) (c) (d) during the period of 12 years prior to the date of the publication of the advertisements referred to below ( Relevant Period )at least three dividends have been paid, but not cashed, in accordance with the Articles in respect of the share to be sold and no dividend has been claimed in respect of such share; during the Relevant Period no communication has been received by the Company from the member or person entitled by transmission to the share; on or after expiry of the Relevant Period the Company has published notice of its intention to sell the share in both a national newspaper and in a newspaper circulating in the area in which the last known address of such member or person appeared; during the further period of three months following the date of publication of the said advertisements and after that period until the exercise of the power to sell the share, the A1: A3:

73 (ii) (e) 3.11 Directors (i) (ii) (iii) (iv) (v) (vi) Company has not received communication from the member or person entitled by transmission to the share; and the Company has given notice to the London Stock Exchange of its intention to make such sale, if shares of the class concerned are listed or dealt in on that exchange. The Company shall account to the member or other person entitled to such share for the net proceeds of such sale by carrying all money in respect thereof to a separate account. The Company shall be deemed to be a debtor to, and not a trustee for, such member or other person in respect of such monies. There shall be no less than two and not more than six Directors in the Company (unless otherwise determined by ordinary resolution). The Directors shall not be required to hold any shares in the Company by way of qualification. Directors may be appointed by ordinary resolution or by the Directors. No person (other than a director retiring by rotation or otherwise) shall be appointed or re-appointed at a general meeting unless he is recommended by the Board; or not less than seven nor more than 42 days before the date of the meeting (at which the director is to be appointed) notice of a member s proposed resolution for the appointment of the prospective director be included in the Company s register of directors. Subject to the provisions of the Statutes, the Board may from time to time appoint one or more of its body to hold any employment or executive office (including that of Chief Executive or Managing Director) for such term (subject to the provisions of the Statutes) and subject to such other conditions as the Board thinks fit in accordance with the Articles. At each annual general meeting of the Company one-third of the Directors (or, in the case of each Company if their number is not a multiple of three, then the nearest number to but not exceeding one-third) shall retire from office by rotation. The Directors to retire by rotation shall include (so far as necessary to obtain the number required) any Director who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election and so that as between persons who became or were last re-elected Directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. Any Director appointed by the Directors shall hold office only until the next annual general meeting, when he shall be eligible for re-election, but shall not be taken into account in determining the Directors to retire by rotation at the meeting. A director may be removed from office by an ordinary resolution of the Company, subject to special notice being given in accordance with the Statutes. The Directors (other than alternate directors) shall be entitled to receive by way of fees for their services as Directors such sum as the Directors, shall in their discretion determine save that the maximum aggregate remuneration does not exceed 75,000 per annum (unless approved by ordinary resolution). The Directors are entitled to be repaid all reasonable travelling, hotel and other expenses properly incurred by him in or about the performance of his duties as Director. The board may grant reasonable additional remuneration to any director who performs any special duties or services outside his ordinary duties. (vii) Pursuant to Resolution 10 to be proposed at the General Meeting, the reference to 75,000 in paragraph 3.11 (vi) will be amended to 95, Borrowing Powers (i) (ii) The Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital and, subject to the Acts, to create and issue debentures, loan stock and other securities whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. The Board shall restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings so as to procure (but as regards subsidiary undertakings only insofar as it can A1: A15:

74 (iii) procure by such exercise) that the aggregate principal amount for the time being outstanding of all borrowings by the group (excluding money borrowed by one group company from another and after deducted cash deposited) shall not without the previous sanction of an ordinary resolution of the Company exceed an amount equal to 50% of the Adjusted Capital and Reserves (as defined below). The expression Adjusted Capital and Reserves means, as shown by the latest audited consolidated balance sheet of the Company subject to deductions and adjustments set out in the articles of association of the Company, a sum equal to the aggregate of (a) the amount paid up on the issued share capital of the Company; and (b) the amount standing to the credit of the reserves including without limitation any share premium account or capital redemption reserve and taking into account any credit or debit balance on profit and loss account Directors Interests (i) (ii) (iii) Subject to the provisions of the Statutes a Director may: (a) (b) (c) enter into or be interested in any contract or arrangement or in any proposal with the Company or in which the Company may be interested; may hold any other office or place of profit under the Company (except that of Auditor or of auditor of a subsidiary of the Company) in conjunction with the office of Director on such terms as to remuneration and otherwise as the Board may approve; may be a director or other officer of, or employed by, or a party to any transaction or arrangement with or otherwise interested in, any company promoted by the Company or in which the Company is otherwise interested or as regards which the Company has any powers of appointment and shall not be liable to account to the Company for any profit, remuneration or other benefit realised by any such office, employment, contract, arrangement, transaction or proposal. Subject to the provisions of the Statutes and provided that he declares the nature of his interest at a meeting of the Directors, a Director may be interested directly or indirectly in any contract or arrangement or in any proposed contract or arrangement with the Company or with any other company in which the Company may be interested. A Director shall not vote or be counted in the quorum in relation to any resolution concerning any contracts, arrangements, transactions or any other proposal whatsoever to which the Company is or are to be a party and in which he has an interest which is, to his knowledge, a material interest unless the resolution concerns any of the following matters: (a) (b) (c) (d) (e) the giving to him or any other person of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or any other person at the request of or for the benefit of the Company or any of their subsidiary undertakings; the giving to any third party of any guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security; any proposal concerning an offer of shares or debentures or other securities of or by the Company or any of its subsidiary undertakings for subscription or purchase in which offer he is or may be entitled to participate as a holder of securities or any underwriting or sub-writing of which he is to participate; any proposal concerning any other corporate in which he does not to his knowledge have an interest in one per cent or more of the issued equity share capital of any class of such body corporate or of the voting rights available to member of such body corporate; any proposal relating to any scheme of arrangement for the benefit of the employees of the Company or any of its subsidiary undertakings which does not award him any privilege or benefit not generally awarded to the employees to whom such arrangement relates; or 74

75 (iii) (iv) (f) any proposal concerning insurance which the Company propose to maintain or purchase for the benefit of Directors or for the benefit of persons who include the Directors. A Director shall not vote or be counted in the quorum on any resolution of the Board or committee of the Board concerning his own appointment as the holder of any office or place of profit with the Company or any company in which the Company is interested. Subject to the provisions of the Acts and for the purposes of Section 175 of CA 2006, the Directors may authorise in such manner and on such terms as they think fit any matter proposed to it in which a Director and/or any connected persons of a Director has or can have, a direct or indirect interest which conflicts, or possibly may conflict, with the interests of the Company provided that the authorisation is passed at a meeting where such is effective without the Director in question and any other interested Director being counted in the quorum or voting at the meeting at which the conflict of interest is authorised Dividends and Other Payments (i) (ii) (iii) Declaration of Dividends (1) The Company may by ordinary resolution and subject to the provisions of the Statutes and the Articles declare dividends to be paid to members according to their respective rights and interest in the profits of the Company, provided that no dividend shall exceed the amount recommended by the Directors. (2) The Board may pay such interim dividends (including any dividend payable at a fixed rate) as appears to them to be justified by the profits of the Company available for distribution. Entitlement to dividends (1) Except as otherwise provided by the rights that attach to shares, all dividends shall be declared and paid according to the amounts paid up (otherwise than in advance of calls) on the shares in respect of which the dividend is paid. (2) Unless otherwise provided by the rights attached to the share, no dividend or other monies payable by the Company or in respect of a share shall bear interest as against the Company. (3) If any dividend remains unclaimed after a period of 12 years from the date of the declaration of that dividend, it shall be forfeited and shall revert to the Company. (4) The Board may, with the prior authority of an ordinary resolution of the Company, subject to such terms and conditions as the Board may determine, offer to holders of shares the right to elect to receive shares credited as fully paid, instead of the whole (or some part, to be determined by the Board) of any dividend specified by the ordinary resolution. Reserves At any time when the Company has given notice in the prescribed form to the Registrar of Companies of its intention to carry on business as investment company ( a relevant period ) the Company shall be prohibited from distributing any capital profits (within the meaning of Section 833(2) of CA 2006). The Directors will establish a reserve to be called the capital reserve and during a relevant period all surpluses arising from the realisation or revaluation of investments or deriving from the realisation, payment off of or other dealing with any capital asset in excess of the book value thereof and all other monies which are considered by the Directors to be in the nature of accretion to capital shall be credited to the capital reserve. Subject to the Acts, the Directors may determine whether any amount received by the Company is to be dealt with as income or capital, or partly one way and partly the other. During a relevant period, any loss realised on the realisation or payment off of other dealing with any investment or other capital assets and, subject to the Acts, any expenses, liability, loss (or provision therefor) which the Directors consider to relate to a capital item (including any proportion of the expenses of management or administration of its assets and/or of the finance costs of the Company) or which they otherwise consider appropriate to be debited to the capital reserve, shall be carried to the debit of the capital reserve. During a relevant 75

76 period, all sums carried and standing to the credit of the capital reserve may be applied for any of the purposes for which sums standing to the credit of any revenue reserve are applicable except that no part of the capital reserve or any other money in the nature of accretion to capital shall be transferred to the revenue reserves of the Company or be treated as profits of the Company available for distribution (as defined by Section 829 of CA 2006) or be applied in paying dividends on any shares of the Company. In periods other than a relevant period, any amount standing to the credit of the capital reserve may be transferred to the revenue reserves of the Company or be regarded or treated as profits of the Company available for distribution (as defined in Section 829 of CA 2006) or be applied in paying dividends of any shares of the Company Transfer or Sale under Section 110, Insolvency Act 1986 A special resolution sanctioning a transfer or sale to another company duly passed pursuant to Section 110 of the Insolvency Act 1986 may in the like manner authorise the distribution of any shares or other consideration receivable by the liquidator among the members otherwise than in accordance with their existing rights and any such determination shall be binding on the members, subject to the right of dissent and consequential rights conferred by said section Voluntary Liquidation of the Company (i) (ii) The Directors shall procure that at the ninth annual general meeting of the Company (and thereafter at five yearly intervals) an ordinary resolution will be proposed to the effect that the Company shall continue in being. If such resolution is not passed the Board shall within four months of that meeting convene a general meeting to propose either or both of the following: (a) (b) a special resolution for the reorganisation or reconstruction of the Company; or a special resolution to wind up the Company voluntarily. On any voluntary winding-up of the Company, the liquidator may, with the sanction of an special resolution and any other sanctions required by law, divide amongst the members in specie the whole or any part of the assets of the Company in such manner as he may determine Indemnity and Insurance (i) (ii) The Board may purchase and maintain insurance for, or for the benefit of, any persons who are or were Directors, officers or employees of the Company or of any other company which is a subsidiary undertaking of the Company or in which the Company has an interest, whether direct or indirect, including without limitation insurance in relation to duties, power or offices in relation to any pension fund or employees benefits trust. The Company shall indemnify the Directors to the extent permitted by law and may take out and maintain insurance for the benefit of the Directors. 4 Directors and their Interests 4.1 As at 27 September 2012 (this being the latest practicable date prior to publication of this document), the Company is not aware of any person who, immediately following the issue of the New Shares pursuant to the Schemes and the Enhanced Buyback Facility, directly or indirectly, has or will have an interest in the Company s capital or voting rights which is notifiable under UK law (under which, pursuant to CA 2006 and the Listing Rules and the Disclosure & Transparency Rules of the FSA, a holding of 3% or more must be notified to the Company). A1:

77 4.2 As at 27 September 2012 (this being the latest practicable date prior to publication of this document), the interests of the Directors (and their immediate families) and the directors of the Target VCTs in the issued share capital of the Company and the Target VCTs were as follows: A1: 17.2 Directors Shares % of issued share capital Company Eclipse 2 Eclipse 3 Eclipse 4 Eclipse 2 Shares % of Eclipse 2 issued share capital Eclipse 3 Shares % of Eclipse 3 issued share capital Eclipse 4 Shares % of Eclipse 4 issued share capital Viscount Cobham 31, Roger Penlington 10, Matthew Cooper 19, , , , Mark Vlessing 5, David Lambert 21, Greg Melgaard 15, , Helen Sinclair - Alex Hambro 7, , Rob Mills As at September (this being the latest practicable date prior to publication of this document) save as disclosed above, no Director, his family or any person connected to the Director within the meaning of Section 252 CA 2006 has any interest in the share or loan capital of the Company. 4.4 Details of the Directors appointments are as follows: Director Date of appointment Date of appointment letter* Annual remuneration ( )** Year to 31 July 2011 remuneration ( )*** 14 months to 30 September 2012 remuneration ( )**** Viscount Cobham 6 April April ,000 21,000 24,500 Roger Penlington 6 April April ,000 16,000 18,667 Matt Cooper 6 April April ,000 16,000 18,667 A1: 15.1 A1: 15.2 A1: 16.1 A1: 16.2 * The Directors have been appointed pursuant to appointment letters which require either party to give three months notice before termination of the appointment (respectively). ** No arrangements have been entered into by the Company, entitling the Directors to compensation for loss of office nor have any amounts been set aside to provide pension, retirement or similar benefits. *** Exclusive of applicable employers National Insurance Contributions. **** Expected remuneration for the current financial period ignoring the proposed merger. Assuming the merger is effected and Resolution 9 is passed, the annual remuneration of the Directors and the Proposed Directors will be Viscount Cobhan (as Chairman of the Company) 21,000, David Lambert (as Audit Committee chairman) 18,500 and all other Directors 17,000. If Resolution 9 is not approved, the aggregate annual remuneration directors for the Enlarged Company will be 75,000 (with directors fees being reduced pro rata). The Proposed Directors will, otherwise, be appointed pursuant to appointment letters on identical terms as that set out above. 4.5 Save for in respect of Matt Cooper, who is the chairman and a shareholder of Octopus and is also a director and shareholder of other VCTs managed by Octopus (including the Target VCTs), there are no potential conflicts of interests between the duties of any Director and their private interests and/or duties. A1: No loan or guarantee has been granted or provided to or for the benefit of any of the Directors. 4.7 The Company has taken out directors and officers liability insurance for the benefit of its Directors, which is renewable on an annual basis. 77

78 4.8 The Directors and the Proposed Directors are currently or have been within the last five years, a member of the administrative, management or supervisory bodies or partners of the companies and partnerships mentioned below: Director Current Past five years Viscount Cobham AGFIA Limited Azure Wealth LLP Midland Flyfishers Limited Trinitas Services Limited Trinity House Events Limited Westcote Developments Limited Westcote Ventures Limited AGF International Advisors Co Limited AGF International Co Limited A1: 14.1 (a) Matt Cooper 10Duke Software Limited Imaginatik plc KMI Brands Ltd Knowledge & Merchandising inc. Limited My Dish Limited Octopus Apollo VCT 1 plc Octopus Apollo VCT 2 plc Octopus Apollo VCT 3 plc Octopus Capital Limited Octopus Eclipse VCT 2 plc Octopus Eclipse VCT 3 plc Octopus Eclipse VCT 4 plc Octopus Eclipse VCT plc Octopus Investments Limited Octopus Titan VCT 1 plc Octopus Titan VCT 2 plc PPL Realisations 2011 Limited The Mental Health Foundation Ultimate Finance Group Limited Which? Financial Services Limited Activ8 Intelligence Limited Axiant Badenoch and Clark Limited Carbon Leadership LLP Carbon Search Limited Global Collect New Saddler s Wells Limited Nottingham Trent University Octopus Phoenix VCT plc Online All-Stars Limited Perfect Pizza Limited Sadler s Wells Development Trust Sadler s Wells Limited Silvermere Energy Limited TDX Group Limited The Core Business plc Roger Penlington Octopus Eclipse VCT plc Brandspace (London) Limited Flasma Limited Greenco Services 2 Limited Octopus Apollo VCT 1 plc Octopus Apollo VCT 2 plc David Lambert A E I F (Carried Interest GP) Limited Catapult Growth Managers GP Limited Catapult Venture Managers Limited East Midlands GP Limited NPI Media Limited Octopus Eclipse VCT 2 plc Catapult Holdings Limited 78

79 Director Current Past five years Alex Hambro BAPCO Closures Holdings Limited BAPCO Closures Research Limited Crescent Capital II GP Limited Crescent Capital III B GP Limited Crescent Capital III GP Limited Crescent Capital NI Limited First Magazine Limited Halkin Development Limited Hazel Renewable Energy VCT 2 PLC Judges Scientific plc Octopus Eclipse VCT 4 plc Whitley Asset Management Limited Chloride Extraction Technologies Limited CUBO Communications Group plc Hamniv (GP) Limited Octopus Eclipse VCT 3 plc 4.9 None of the Directors or Proposed Directors have any convictions in relation to fraudulent offences during the previous five years Save as disclosed in this paragraph, there were no bankruptcies, receiverships or liquidations of any companies or partnership where any of the Directors were acting as (i) a member of the administrative, management or supervisory body, (ii) a partner with unlimited liability, in the case of a limited partnership with a share capital, (iii) a founder where the company had been established for fewer than five years or (iv) a senior manager during the previous five years Matt Cooper was a director of Octopus Phoenix VCT plc until November 2011, following the company being placed into members voluntary liquidation in August 2010 pursuant to a merger with Octopus AIM VCT plc prior to being dissolved in November Matt Cooper was also a director of PPL Realisations 2011 Limited until it was placed into administration in August At the date of the latest filed administrator s progress report there was in excess of 6.9 million owing to secured creditors and a total of 1.7 million owing to unsecured creditors. Matt Cooper was also, a director of Online All-Stars Limited and New Saddler s Wells Limited which were voluntarily struck off the Register of Companies and dissolved in November 2009 and December 2011 respectively David Lambert was appointed as a director of NPI Media Limited in August 2007 and subsequently resigned as a director in November In December 2007 the company was placed into administration and moved from administration to creditors voluntary liquidation on or around 17 January As at the date of this document a distribution in excess of 5.7 million has been paid to secured creditors but no distributions have been made to unsecured creditors There have been no official public incriminations and/or sanctions of any Director or Proposed Director by statutory or regulatory authorities (including designated professional bodies) and no Director or Proposed Director has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of any company during the previous five years. A1: 14.1 (b) A1: 14.1 (b) A1: 14.1 (d) 5. Overseas Shareholders 5.1 The issue of New Shares to be issued pursuant to the Schemes and the Enhanced Buyback Facility to persons resident in or citizens of jurisdictions outside the UK may be affected by the laws of the relevant jurisdiction. Such shareholders should inform themselves about and observe any legal requirements. The Enhanced Buyback Facility is only being made available to UK Shareholders. 5.2 None of the New Shares to be issued pursuant to the Schemes and the Enhanced Buyback Facility have been or will be registered under the United States Securities Act 1933, as amended, or qualify under applicable United States state statute and the relevant clearances have not been, and will not be, obtained from the securities commission of any province of Canada, Australia, Japan, South Africa or New Zealand. 5.3 The Company is not registered under the United States Investment Company Act of 1940, as amended, and investors are not entitled to the benefits of that Act. 79

80 5.4 No offer is being made, directly, under the Schemes and the Enhanced Buyback Facility, in or into or by the use of s, or by means of instrumentality (including, without limitation, facsimile, transmission, telex or telephone) or interstate or foreign commerce, or of any facility in a national securities exchange, of the United States, Canada, Australia, Japan, South Africa or New Zealand. 5.5 It is the responsibility of Target VCTs Shareholders and Shareholders with registered addresses outside the UK to satisfy themselves as to the observance of the laws of the relevant jurisdiction in connection with the issue of New Shares pursuant to the Schemes and the Enhanced Buyback Facility, including the obtaining of any government or exchange control or other consents which may be required, the compliance with any other necessary formalities which need to be observed and the payment of any issue, transfer or other taxes or duties due in such jurisdiction. 6. Material Contracts 6.1 Save as disclosed in this paragraph 6.1, the Company has not entered, other than in the ordinary course of business, into any contract which is or may be material to the Company within the two years immediately preceding the publication of this document or into any contract containing provisions under which the Company has any obligation or entitlement which is material to the Company as at the date of this document: An investment management agreement dated 15 April 2004 between the Company (1) and Octopus (2) (as amended by deeds of variation between the parties dated 4 July 2006 and 27 September 2012) pursuant to which Octopus provides discretionary investment management and administration services to the Company. The appointment of Octopus is terminable by either party on not less than 12 months notice in writing and may also be terminated in circumstances of material breach by either of these parties. The agreement includes indemnities given by the Company to Octopus which are usual for this type of agreement. Octopus receives an annual investment management fee of an amount equal to 2% of the net assets of the Company, calculated at annual intervals as at 31 January and payable quarterly in advance, together with any applicable VAT thereon. Octopus also receives an annual administration fee of an amount equal to 0.3% of the net assets of the Company, calculated at annual intervals as at 31 January and payable quarterly in advance, together with any applicable VAT thereon. These management and administration fees shall not change in respect of the Enlarged Company and shall automatically cover the enlarged assets following the proposed merger. Octopus is also entitled to performance related incentive fees once distributions per Share in issue since launch have reached 45p in aggregate. Octopus will then be paid an amount (in respect of each Share issued pursuant to the original launch prospectus issued by the Company and remaining in issue on a Payment Date) equal to 20% of the Increase in Value on the relevant Payment Date, subject to the Total Return exceeding the Hurdle Value on that Payment Date. For these purposes:. Payment Date means the date on which the Company publishes audited accounts in the years 2007 to 2015;. Total Return means the NAV per Share as at the Payment Date plus dividends paid or declared per Share in issue from launch;. Hurdle Value means the Total Return on the date Shares were first issued, increased by simple interest at an annual rate of 7.5% to the relevant Payment Date; and. Increase in Value means the amount by which the Total Return exceeds (i) the Total Return on the date Shares were first issued in respect of the Payment Date and (ii) thereafter, the Total Return on the Payment Date when the Hurdle Value was last exceeded. The Board and Octopus have agreed that, subject to one or more of the Schemes becoming effective, the above performance related incentive fee arrangement will be terminated. The Board will, acting reasonably and in good faith, but subject to legal and regulatory requirements, consider implementing a new performance related incentive fee arrangement to suitably incentivise Octopus when the overall performance of the assets of the Company improves. A1: 22 A15:

81 The normal running costs of the Company are capped at an amount equal to 3.6% of the Company s average net assets. Any excess over this amount is borne by Octopus. Normal running costs means the ordinary expenses of the Company and includes the annual investment management and administration fees, directors remuneration and normal fees payable to the Company s registrars, stockbroker, auditors, solicitors and VCT status advisers. It does not include performance incentive fees, annual trail commission, irrecoverable VAT or any exceptional items. The Board and Octopus have agreed that, subject to one or more of the Schemes becoming effective, the normal running costs cap of the Company will be reduced to an amount equal to 2.75% of the Company s average net assets. The Board and Octopus have further agreed that, subject to one or more of the Schemes becoming effective, they will meet annually to discuss and agree the level of resources required within Octopus to deliver the investment mandate for the Enlarged Company (the non-delivery by Octopus to constitute a material breach of the agreement) and that, unless the Board agree otherwise, no more than 30% of new investments in a rolling three year period following the proposed merger will be in investee companies in which any of the Octopus Titan VCTs have invested (the investment price requiring a valuation validation by a new independent co-investor). The Board will also retain a veto right in respect of all investments and divestments. Octopus also retains the right pursuant to the agreement to charge transaction, directors, monitoring, consultancy, corporate finance, introductory, syndication fees, commissions and refunds of commissions in respect of the management of the Company s investment portfolio A co-investment agreement entered into in 2005 between the Company (1) and Octopus (2) pursuant to which Octopus employees are able to invest alongside the Company and other Octopus managed VCTs. Pursuant to the agreement, Octopus procure that those of its employees participating in the co-invest scheme invest a total of 7.5% of the amount invested in ordinary shares by the Company and other Octopus managed VCTs in each investment made (other than investments in companies quoted on AIM or investments which are structured entirely as ordinary shares). The shares held by Octopus employees are held through a nominee company controlled by Octopus, will be acquired and realised at the same time and on the same terms (in relation to the relevant securities) as shares held by the Company and other Octopus managed VCTs, and all voting and other rights attributable to those shares will be exercised by Octopus in parallel with the shares held by the Company and other Octopus managed VCTs. The co-investment scheme will continue to operate in respect of the Enlarged Company. 6.2 The following contracts will be entered into, subject, inter alia, to the approval by Shareholders of applicable Resolutions at the General Meeting and the relevant Scheme becoming effective: A transfer agreement between the Company and Eclipse 2 (acting through the Liquidators) pursuant to which all of the assets and liabilities of Eclipse 2 will be transferred to the Company (subject only to the consent required to transfer such assets and liabilities) in consideration for New Shares in accordance with Part II of this document. The Liquidators will further agree under this agreement that all sale proceeds and/or dividends received in respect of the underlying assets and/ or other rights of Eclipse 2 will be transferred on receipt to the Company as part of the Eclipse 2 Scheme. This agreement will be entered into as part of the Eclipse 2 Scheme A transfer agreement between the Company and Eclipse 3 (acting through the Liquidators) pursuant to which all of the assets and liabilities of Eclipse 3 will be transferred to the Company (subject only to the consent required to transfer such assets and liabilities) in consideration for New Shares in accordance with Part II of this document. The Liquidators will further agree under this agreement that all sale proceeds and/or dividends received in respect of the underlying assets and/ or other rights of Eclipse 3 will be transferred on receipt to the Company as part of the Eclipse 3 Scheme. This agreement will be entered into as part of the Eclipse 3 Scheme A transfer agreement between the Company and Eclipse 4 (acting through the Liquidators) pursuant to which all of the assets and liabilities of Eclipse 4 will be transferred to the Company (subject only to the consent required to transfer such assets and liabilities) in consideration for New Shares in accordance with Part II of this document. The Liquidators will further agree under this agreement that all sale proceeds and/or dividends received in respect of the underlying assets and/ or other rights of Eclipse 4 will be transferred on receipt to the Company as part of the Eclipse 4 Scheme. This agreement will be entered into as part of the Eclipse 4 Scheme. A15:

82 6.2.4 An indemnity from the Company to the Liquidators pursuant to which the Company will indemnify the Liquidators for expenses and costs incurred by them in connection with the Eclipse 2 Scheme. A liquidation fee has been agreed (including an amount representing contingency) and taken into account in the merger calculations. This agreement will be entered into as part of the Eclipse 2 Scheme An indemnity from the Company to the Liquidators pursuant to which the Company will indemnify the Liquidators for expenses and costs incurred by them in connection with the Eclipse 3 Scheme. A liquidation fee has been agreed (including an amount representing contingency) and taken into account in the merger calculations. This agreement will be entered into as part of the Eclipse 3 Scheme An indemnity from the Company to the Liquidators pursuant to which the Company will indemnify the Liquidators for expenses and costs incurred by them in connection with the Eclipse 4 Scheme. A liquidation fee has been agreed (including an amount representing contingency) and taken into account in the merger calculations. This agreement will be entered into as part of the Eclipse 4 Scheme. 7. Corporate Governance 7.1 Board of Directors The Company has a Board of three Non-Executive Directors, two of whom are considered to be independent. Matt Cooper (who is a director of all of the Companies) is not considered to be independent due to his role as chairman of Octopus. The Board meets regularly on a quarterly basis, and on other occasions as required, to review the investment performance and monitor compliance with the investment policy laid down by the Board. The Board has a formal schedule of matters specifically reserved for its decision which include:. the consideration and approval of future developments or changes to the investment policy, including risk and asset allocation;. consideration of corporate strategy;. approval of the appropriate dividend to be paid to the shareholders;. the appointment, evaluation, removal and remuneration of Octopus;. the performance of the Company, including monitoring of the discount of the NAV and the share price; and. monitoring shareholder profiles and considering shareholder communications. The Chairman leads the Board in the determination of its strategy and in the achievement of its objectives. The Chairman is responsible for organising the business of the Board, ensuring its effectiveness and setting its agenda, and has no involvement in the day to day business of the Company. He facilitates the effective contribution of the Directors and ensures that they receive accurate, timely and clear information and that they communicate effectively with shareholders. The company secretary is responsible for advising the Board through the Chairman on all governance matters. All of the Directors have access to the advice and services of the company secretary, who has administrative responsibility for the meetings of the Board and its committees. Directors may also take independent professional advice at the Company s expense where necessary in the performance of their duties. As of all the Directors are non-executive, it is not considered appropriate to identify a member of the Board as the senior non-executive Director of the Company. The Articles and the schedule of matters reserved to the Board for decision provide that the appointment and removal of the company secretary is a matter for the full Board. 7.2 Audit Committee The Audit Committee is currently chaired by Roger Penlington and consists of two independent directors. If the merger is effected Roger Penlington will step down as Audit Committee chairman and David Lambert will be appointed in his place with such number of committee members increasing to five. The Audit Committee believes Roger Penlington and David Lambert, should the merger be effected, possess the appropriate and relevant financial experience as per the A1:

83 requirements of the Code. The Board considers that the members of the Audit Committee are and will continue to be if the merger is effected independent and have collectively the skills and experience to discharge their duties effectively. The Audit Committee s terms of reference include the following roles and responsibilities:. reviewing and making recommendations to the Board in relation to the Company s published financial statements and other formal announcements relating to the Company s financial performance;. reviewing and making recommendations to the Board in relation to the Company s internal control (including internal financial control) and risk management systems;. periodically considering the need for an internal audit function;. making recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditor and approving the remuneration and terms of engagement of the external auditor;. reviewing and monitoring the external auditor s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional regulatory requirements;. monitoring the extent to which the external auditor is engaged to supply non-audit services; and. ensuring that Octopus has arrangements in place for the investigation and follow-up of any concerns raised confidentially by staff in relation to propriety of financial reporting or other matters. The Audit Committee reviews its terms of reference and its effectiveness annually and recommends to the Board any charges required as a result of the review. The terms of reference are available on request from the company secretary. The Audit Committee meets twice per year and has direct access to Grant Thornton UK LLP, the Company s external auditor. The Audit Committee has reviewed the non audit services provided by the external auditor and does not believe they are sufficient to influence their independence or objectivity due to the fee being an immaterial expense. When considering whether to recommend the re-appointment of the external auditor, the Audit Committee takes into account the tenure of the current auditor in addition to comparing the fees charged by similar sized audit firms. Once the Audit Committee has made a recommendation to the Board in relation to the appointment of the external auditor this is then ratified at the annual general meeting through an ordinary resolution. The Company does not have an independent internal audit function as it is not deemed appropriate given the size of the Company and the nature of the Company s business. However, the Audit Committee considers annually whether there is a need for such a function and if so would recommend this to the Board. During the year ended 31 July 2011, the Audit Committee discharged its responsibilities by:. reviewing and approving the external auditor s terms of engagement and remuneration;. reviewing the external auditor s plan for the audit of the Company s financial statements, including identification of key risks and confirmation of auditor independence;. reviewing Octopus statement of internal controls in relation to the Company s business and assessing the effectiveness of those controls in minimising the impact of key risks;. reviewing periodic reports on the effectiveness of Octopus compliance procedures;. reviewing the appropriateness of the Company s accounting policies;. reviewing the Company s draft annual financial and interim results statement prior to Board approval; and. reviewing the external auditor s detailed reports to the committee on the annual financial statements. 83

84 7.3 Nomination Committee The Nomination Committee considers the selection and appointment of Directors and makes recommendations to the Board as to the level of Directors fees. It has not yet been necessary for the Nomination Committee to meet and so terms of reference will be agreed if and when appropriate. The Board does not have a separate Remuneration Committee as the Company has no employees or executive Directors. 7.4 Internal control The Directors have overall responsibility for keeping under review the effectiveness of the Company s systems of internal controls. The purpose of these controls is to ensure that proper accounting records are maintained, the Company s assets are safeguarded and the financial information used within the business and for publication is accurate and reliable; such a system can only provide reasonable and not absolute assurance against material misstatement or loss. The system of internal controls is designed to manage rather than eliminate the risk of failure to achieve the business objectives. The Board regularly reviews financial results and investment performance with Octopus. Octopus identifies investment opportunities which are reviewed by the Board prior to completion. Octopus monitors the portfolio of investments and makes recommendations to the Board in terms of suggested disposals and further acquisitions. Octopus is engaged to carry out the accounting function and retains physical custody of the documents of title relating to unquoted investments. Quoted investments are held in CREST. Octopus regularly reconciles the client asset register with the physical documents. The Directors confirm that they have established a continuing process throughout the year and up to the date of this report for identifying, evaluating and managing the significant potential risks faced by the Company and have reviewed the effectiveness of the internal control systems. As part of this process an annual review of the internal control systems is carried out in accordance with the Financial Reporting Council guidelines for internal control. The Board does not consider it necessary to have an internal audit function. The internal control systems include the production and review of monthly bank and management accounts. All outflows made from the Company accounts require authorisation at appropriate levels of Octopus employees. The Company is subject to a full annual audit and the auditors also act as auditors of other venture capital trusts managed by Octopus. Further to this, the audit partner has open access to the Directors of the Company and Octopus is subject to regular review by the Octopus compliance department. 7.5 Risk Management The Company s financial instruments comprise equity and fixed interest investments, cash balances and liquid resources including debtors and creditors. The Company holds financial assets in accordance with its investment policy of investment mainly in a portfolio of VCT-qualifying unquoted securities whilst holdings a proportion of its assets in case or near-cash investments in order to provide a reserve of liquidity. 8. Taxation 8.1 The following paragraphs, which are intended as a general guide only and are based on current legislation and HMRC practice, summarise advice received by the Board as to the position of the Company s Shareholders who hold Shares other than for trading purposes. Any person who is in any doubt as to his taxation position or may be subject to taxation in any jurisdiction other than the UK should consult his professional advisers. 8.2 Taxation of dividends under current law, no tax will be withheld by the Company when it pays a dividend. 8.3 Stamp duty and stamp duty reserve tax the Company has been advised that no stamp duty or stamp duty reserve tax will be payable on the issue of the New Shares to be issued pursuant to the merger. The Company has been advised that the transfer of New Shares will, subject to any applicable exemptions, be liable to ad valorem stamp duty at the rate of 0.5% of the consideration paid. An unconditional agreement to transfer such New Shares if not completed by a duly stamped A3:

85 stock transfer will be subject to stamp duty reserve tax generally at the rate of 50p per 100 (or part thereof) of the consideration paid. 8.4 Close company the Board believes that the Company is not, and expects that following completion of the Schemes and the Enhanced Buyback Facility, it will not be, a close company within the meaning of ITA If the Company was a close company in any accounting period, approval as a VCT for the Company would be withdrawn. 8.5 Further details on the position for Shareholders who may participate in the Enhanced Buyback Facility are set out in Part IX of this document. 9. Related Party Transactions Related party transactions for the Company undertaken in the three financial years ended 31 July 2009, 2010 and 2011 are set out in the respective audited reports and accounts for those years which are incorporated by reference: in Notes 3, 5 and 19 on pages 39, 40 and 48 for the year ended 31 July 2009, in Notes 3, 5 and 19 on pages 38, 39 and 46 for the year ended 31 July 2010, and in Notes 3,5 and 19 on pages 54, 55 and 67 for the year ended 31 July Apart from the payment of the Directors remuneration on the basis set out in paragraph 4.4 above and payments to Octopus on the basis set out in paragraph above and promotion fees of 26,808.89, 41,999.08, and nil in the three years ended 31 July 2009, 2010 and 2011 respectively and 16, in the current financial year, the Company has not entered into any related party transactions within the meaning of IFRS or UK GAAP since 31 July General Working Capital Statement 10.1 The Company is of the opinion that its working capital is sufficient for its present requirements, that is for at least the twelve month period from the date of this document. Capitalisation and Indebtedness Statement As at 27 September 2012 (the latest practicable date prior to publication of this document), the Company has no indebtedness, whether guaranteed, unguaranteed, secured, unsecured, direct and/or contingent and there is no current intention of incurring any such indebtedness for at least the twelve month period from the date of this document The capitalisation of the Company as at 31 January 2012 (extracted from the Half-Yearly Report), is set out below. There has been no material change in the capitalisation of the Company between 31 January 2012, the date of the Half-Yearly Report and 27 September 2012, the latest practicable date before the date of publication of this document. 000 A1: 19 A3: 3.1 A3: 3.2 Called-up share capital 3,181 Share premium 3,450 Other reserves 11,337 Total 17,968 Other 10.4 There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened, of which the Company is aware) which may have, or have had in the 12 months immediately preceding the date of this document, a significant effect on the financial position or profitability of the Company Save for the movement in the net asset value per share from 56.8p as at 31 January 2012 to 49.4p as at 31 July 2012, there has been no significant change in the financial or trading position of the Company since 31 January 2012, the date to which the Half-Yearly Report was made up to, to the date of this document. A1: 20.8 A1: There has been no significant change in the financial or trading position of Eclipse 2 since 31 July 2012, the date to which the Eclipse 2 half-yearly report was made up to, to the date of this document. 85

86 10.7 Save for the movement in the net asset value per Eclipse 3 Share from 51.1p as at 31 January 2012 to 47.2p as at 31 July 2012, there has been no significant change in the financial or trading position of Eclipse 3 since 31 January 2012, the date to which the Eclipse 3 half-yearly report for the six month period ended 31 January 2012 was made up to, to the date of this document Save for the movement in the net asset value per Eclipse 4 Share from 51.1p as at 31 January 2012 to 47.2p as at 31 July 2012, there has been no significant change in the financial or trading position of Eclipse 4 since 31 January 2012, the date to which the Eclipse 4 half-yearly report for the six month period ended 31 January 2012 was made up to, to the date of this document There have been no important events so far as the Company and the Directors are aware relating to the development of the Company or its business There have been no significant factors, whether governmental, economic, fiscal, monetary or political, 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 prospects or which have materially affected the Company s income from operations so far as the Company and the Directors are aware There are no known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Company s prospects for at least the current financial year, so far as the Company and the Directors are aware Scott-Moncrieff (a member of the Institute of Chartered Accountants in Scotland) has given and has not withdrawn its written consent to the inclusion in this document of its report set out in Part VII of this document in the form and context in which it is included and has authorised the contents of its report for the purposes of Rule 5.5.3(2)(f) of the Prospectus Rules Matrix Corporate Capital LLP and the Liquidators have given and not withdrawn their written consent to the issue of this document and the inclusion of their names and the references to them in this document in the form and context in which they appear Shareholders will be informed, by means of the half-yearly and/or annual report or through a Regulatory Information Service announcement if the investment restrictions which apply to the Company as a VCT detailed in this document are breached The Company s capital resources are restricted insofar as they may be used only in putting into effect the investment policies in this document. There are no firm commitments in respect of the Company s principal future investments The Company does not have any material shareholders with different voting rights. All Shareholders have the same voting rights in respect of the existing share capital of the Company. The Company is not aware of any person who, directly or indirectly, exercises or could exercise control over the Company, nor of any arrangements, the operation of which, may be at a subsequent date result in a change of control of the Company The Company has no employees or subsidiaries The typical investor for whom investment in the Company is designed is an individual retail investor aged 18 or over who is resident and a tax payer in the UK As at 27 September 2012 (this being the latest practicable date prior to publication of this document), the Company is not aware of any person who, directly or indirectly, has or will have an interest in the capital of the Company or voting rights which is notifiable under UK law (under which, pursuant to CA 2006 and the Listing Rules and Disclosure and Transparency Rules of the FSA, a holding of 3% or more will be notified to the Company The Company is subject to the investment restrictions relating to a venture capital trust in ITA 2007, as more particularly detailed in Part X of this document, and in the Listing Rules which specify that (i) the Company must, at all times, invest and manage its assets in a way which is consistent with its object of spreading investment risk and in accordance with its published investment policy as set out on page 39 of this document; (ii) the Company must not conduct any trading activity which is significant in the context of its group as a whole; and (iii) the Company may not invest more than 10%, in aggregate, of the value of the total assets of the issuer at the time an investment is made in other listed closed-ended investment funds. Any material change to the investment policy of the Company will require the approval of Shareholders pursuant to the Listing Rules. The Company A1: A1: A1: 23.1 A15: 2.1 A1: 10.4 A1: 18.2 A1: 18.3 A1: 18.4 A1: 7.1 A15: 1.4 A1: 18.1 A15:

87 intends to direct its affairs in respect of each of its accounting periods so as to qualify as a venture capital trust and accordingly: the Company s income is intended to be derived wholly or mainly from shares or other securities, as this phrase is interpreted by HMRC; the Company will not control the companies in which it invests in such a way as to render them subsidiary undertakings The Company and its Shareholders are subject to the provisions of the City Code on Takeovers and Mergers and CA 2006, which require shares to be acquired/transferred in certain circumstances If 170 million New Shares are issued in aggregate under the Schemes and the Enhanced Buyback Facility, the existing 32,091,513 Shares would represent 15.9% of the enlarged issued share capital. 11. Information Incorporated by Reference 11.1 In respect of the Company, the annual reports for the financial years ended 31 July 2009, 2010 and 2011 and the Half-Yearly Report are being incorporated by reference into Part VI of this document. A3: 4.9 A3: 9.1 A1: In respect of Eclipse 2, the annual reports for the financial years ended 31 January 2010, 2011 and 2012 and the half-yearly report for the six month period ended 31 July 2012 are being incorporated by reference into Part VI of this document In respect of Eclipse 3, the annual reports for the financial years ended 31 July 2009, 2010 and 2011 and the half-yearly report for the six month period ended 31 January 2012 are being incorporated by reference into Part VI of this document In respect of Eclipse 4, the annual report for the year ended 31 July 2009, 2010 and 2011 and the half-yearly report for the six month period ended 31 January 2012 are being incorporated by reference into Part VI of this document. 12. Documents Available for Inspection Copies of the following documents will be available for inspection during normal business hours on any day (Saturdays, Sundays and public holidays excepted) from the date of this document until the Effective Date at the offices of SGH Martineau LLP, One America Square, Crosswall, London EC3N 2SG and also at the registered office of the Company: A1: the memorandum and articles of association of the Company; 12.2 in respect of the Company, the annual reports for the financial years ended 31 July 2009, 2010 and 2011 and the Half-Yearly Report; 12.3 in respect of Eclipse 2, the annual reports for the financial years ended 31 January 2009, 2010 and 2011 and the half-yearly report for the six month period ended 31 July 2012; 12.4 in respect of Eclipse 3, the annual reports for the financial years ended 31 July 2009, 2010 and 2011 and the half-yearly report for the six month period ended 31 January 2012; 12.5 in respect of Eclipse 4, the annual reports for the financial years ended 31 July 2009, 2010 and 2011 and the half-yearly report for the six month period ended 31 January 2012; 12.6 the material contracts referred to in paragraph 5 above (the contracts referred to at paragraph 6.2 being subject to non-material amendment); 12.7 the Target VCTs Circular; 12.8 the Circular; and 12.9 this document. 28 September

88 PART XII ENHANCED BUYBACK FACILITY APPLICATION PROCEDURES AND TERMS AND CONDITIONS A3: ENHANCED BUYBACK FACILITY APPLICATION PROCEDURES To apply to participate in the Enhanced Buyback Facility, please complete and return the Enhanced Buyback Facility Application Form (at the end of this document), together with your relevant share certificate by post using the pre-paid envelope provided or alternatively to Octopus Investments Limited, 20 Old Bailey, London EC4M 7AN or hand delivered (during normal business hours only). Do not send in your Enhanced Buyback Application Form before the Enhanced Buyback Facility opens on 2 November Please complete all parts of the relevant Enhanced Buyback Facility Application Form(s) in accordance with the following instructions. If multiple registered holdings are applicable please complete separate Enhanced Buyback Facility Application Forms for each such holding by copying the form as necessary. Section 1 Existing Shares to be Tendered If a Shareholder wishes to apply for their full holding of Existing Shares to be tendered, then the number of Existing Shares held should be written into Box 1A of the Enhanced Buyback Facility Application Form. If a Shareholder wishes to apply for only their Basic Entitlement to be tendered (i.e. 50% of a Shareholder s holding on 1 November 2012, rounded down to the nearest whole share), a cross [x] should be placed in Box 1B of the Enhanced Buyback Facility Application Form. If a Shareholder wishes to apply for a differing number of Existing Shares to be tendered, then that number of Existing Shares should be written into Box 1A (including a Shareholder s Basic Entitlement if applying for more than the Basic Entitlement). Section 2 To be completed by all Shareholders Please sign/execute and date the form in accordance with the instructions thereon. By signing and dating the form, Shareholders will agree to sell Existing Shares and subscribe in their own name or, if completed, the name of the person detailed in Section 3 for New Shares under the terms and conditions of the Enhanced Buyback Facility as set out in this Part XII. By signing an Enhanced Buyback Facility Application Form, a Shareholder DECLARES THAT: i. they have read the Enhanced Buyback Facility Terms and Conditions of Application set out in the Prospectus dated 28 September 2012 and agree to be bound by them; ii. iii iv. they are the legal and, unless Section 3 has been completed, the beneficial owner of the Existing Shares being tendered under the Enhanced Buyback Facility; unless Section 3 has been completed, they will be the legal and beneficial owner of the New Shares issued to them under the Enhanced Buyback Facility; they understand the risk factors associated with the Enhanced Buyback Facility and an investment in the Company; and v. to the best of the Shareholder s knowledge and belief, the personal details given are correct. By signing the Enhanced Buyback Facility Application Form on behalf of an individual whose details are shown in Section 2 of the Enhanced Buyback Facility Application Form, the person signing the form makes a declaration (on behalf of such individual) on the terms of sub-paragraphs i. to v above. Section 3 Only to be completed for applications by a nominee where the proceeds are to be reinvested for a beneficial shareholder Please insert, in BLOCK CAPITALS, the personal details relating to the beneficial shareholder (please ensure full details are provided including full name, address, date of birth, national insurance number and contact details). The beneficial shareholder must sign/execute and date the form and in doing so DECLARES that they are the beneficial owner of the Existing Shares being tendered under the Enhanced Buyback Facility and agrees to use the proceeds of sale of the Existing Shares to subscribe for New Shares, such sale and 88

89 subscription to be under the terms and conditions of the Enhanced Buyback Facility as set out in this Part XII. Please provide contact details for the nominee to assist with queries in relation to the application. Section 4 Financial Intermediaries Details If applications are being submitted via a financial intermediary, the financial intermediary should complete (in BLOCK CAPITALS) and stamp Section 4. Please provide a contact name, telephone number, address and details of their authorisation under the Financial Services and Markets Act The right is reserved to withhold any payment of commission if the Company is not, at its sole discretion, satisfied that the agent is authorised or is unable to identify the agent on the basis of the information provided. Commission cheques will be made payable to the IFA detailed in Section 4. If you complete and stamp Box 4 of the Application Form you are warranting that the applicant is known to you and that you have completed all the verification procedures as required by the relevant rules and guidance of the FSA, the Joint Money Laundering Steering Group Guidance Notes and other anti-money laundering laws and regulations as may be considered appropriate. You also confirm that this information can be relied upon by the Receiving Agent and Octopus and will, subject to reasonable notice, be made available to the Company, the Receiving Agent or Octopus for inspection upon request. In the event of delay or failure to produce such information, the Company may refuse to accept an application. Applicants under the Enhanced Buyback Facility should return completed Enhanced Buyback Facility Application Forms, together with share certificates, by post using the pre-paid envelope provided or alternatively to Octopus Investments Limited, 20 Old Bailey, London EC4M 7AN or hand delivered (during normal business hours only). ENHANCED BUYBACK FACILITY TERMS AND CONDITIONS The following terms and conditions apply to the Enhanced Buyback Facility, save as set out below. A3: Save where the context otherwise requires, words and expressions defined in the Definitions section of this document have the same meanings when used in these terms and conditions and the Enhanced Buyback Facility Application Form. The section headed Enhanced Buyback Facility Application Procedure in this Part XII and the Enhanced Buyback Facility Application Form form part of these terms and conditions of application. General (a) The Enhanced Buyback Facility provides the means for Shareholders (which for the avoidance of doubt includes Target VCT Shareholder who receives New Shares as part of the merger process) to apply to tender some or all of their Existing Shares to the Company for repurchase and to subscribe (or, if applicable, for the underlying beneficial holder to subscribe where the Existing Shares are held by a nominee) for New Shares on the terms and subject to the conditions set out in this document (including any supplementary prospectus issued by the Company and filed with the FSA) and the accompanying Enhanced Buyback Facility Application Form. (b) Shareholders are not obliged to tender any Existing Shares pursuant to the Enhanced Buyback Facility. Shareholders who do not wish to participate in the Enhanced Buyback Facility in respect of Existing Shares should not take any action and must not complete or return the Enhanced Buyback Facility Application Form at the end of this document. Conditions (c) The Enhanced Buyback Facility is conditional on approval of Resolutions 5 and 10 to be proposed at the General Meeting. If such Resolutions are not approved, the Enhanced Buyback Facility will be withdrawn. The Enhanced Buyback Facility will only be implemented to the extent that the Board believes that the Company has sufficient reserves to lawfully effect the purchase of Shares pursuant to the Enhanced Buyback Facility. (d) (e) The maximum number of Existing Shares to be purchased will be such number that represents 50% of the issued share capital as at the Enhanced Buyback Facility Record Date. The Enhanced Buyback Facility is only open to UK Shareholders (and their UK beneficial holder if the Existing Shares are held by a nominee on the register on the Enhanced Buyback Facility 89

90 Record Date. Shareholders who hold their Existing Shares in CREST will need to rematerialise their Existing Shares into certificated form in order to participate in the Enhanced Buyback Facility. (f) The Enhanced Buyback Facility will open on 2 November 2012 and close at noon on 28 December The Board reserves the right to extend the closing date of the Enhanced Buyback Facility and to accept applications and to purchase Existing Shares and issue, and arrange for the listing of, New Shares on dates later than those stated above. (g) Each UK Shareholder is: (i) (ii) entitled to apply to sell a number of Existing Shares up to their Basic Entitlement at the Tender Price with the proceeds simultaneously being used to purchase New Shares at the Issue Price, rounded down to the nearest whole New Share; and also entitled to apply to tender additional Existing Shares in excess of their Basic Entitlement in the event other Shareholders do not participate up to 50% of the issued share capital as at 1 November 2012 (the excess to be allocated pro rata to the number of Existing Shares tendered, rounded down to the nearest whole share, subject to the discretion of the Board). (h) (i) If the Board considers that the Company does not have sufficient reserves to lawfully implement the Enhanced Buyback Facility in full or that implementing the Enhanced Buyback Facility in respect of valid applications received would result in the Company having insufficient reserves for ongoing purposes (taking into account reserves expected to be created), the Board may reduce the maximum number of Existing Shares to be purchased under the Enhanced Buyback Facility and a Shareholder s entitlement to participate up to his or her Basic Entitlement will be reduced accordingly. The Board expects the Company to be able to implement the Enhanced Buyback Facility in full. The Board further reserves the right (following consultation with Octopus) to change the Enhanced Buyback Facility Record Date and further amend or extend (as applicable) the closing date and implementation timetable at its discretion. The Enhanced Buyback Facility will be implemented by the Company and the Broker (as the Company s agent) and no cash requires to be paid by participating Shareholders. The Enhanced Buyback Facility is treated as comprising a tender offer to purchase Existing Shares and the issue of New Shares pursuant to an open offer. Settlement (j) The Receiving Agent will process applications from Shareholders to sell Existing Shares to the Company and to subscribe for New Shares under the Enhanced Buyback Facility. (k) (l) (m) Existing Shares in respect of which a valid application is made under the Enhanced Buyback Facility will be purchased by the Broker as agent for the Company at the Tender Price. The proceeds of the sale of the Existing Shares are authorised by each relevant Shareholder to be retained by the Company and used on behalf of that Shareholder or, if applicable, the underlying beneficial holder where the Existing Shares are held by a nominee, to purchase New Shares at the Issue Price. New Shares will be issued and credited as fully paid. Application will be made to the UK Listing Authority for the New Shares to be issued to be admitted to the premium segment of the Official List of the UK Listing Authority and to the London Stock Exchange s market for trading on the London Stock Exchange s main market for listed securities. Admission is expected to take place within three Business Days after each allotment. The application of the proceeds of the sale of Existing Shares in respect of the subscription for New Shares will fully discharge any obligation of the Company and/or the Broker to pay to a Shareholder the consideration to which he or she is entitled in respect of the purchase of Existing Shares. Any proceeds of sale of the Existing Shares insufficient to purchase a whole New Share will be retained by the Company and used for its own purposes. Overseas Shareholders (n) The distribution of this document and an Enhanced Buyback Facility Application Form and making the Enhanced Buyback Facility available to persons who have registered addresses in, or who are resident or ordinarily resident in, or citizens of, or which are corporations, partnerships or other entities created or organised under the laws of countries other than the UK or to persons who are nominees of or custodians, trustees or guardians for citizens, residents in or nationals of, countries 90

91 other than the UK may be affected by the laws or regulatory requirements of the relevant jurisdictions. (o) (p) (q) No action has been or will be taken by the Receiving Agent, the Company, the Broker, Octopus or any other person, to permit a public offering or distribution of this document (or any other offering or publicity materials or the Enhanced Buyback Facility Application Form relating to the tendering of Existing Shares or the issue of New Shares) in any jurisdiction where action for that purpose may be required, other than in the UK. The terms and conditions set out in this document and/or the accompanying Enhanced Buyback Facility Application Form relating to the participation of Overseas Shareholders may be waived, varied or modified as regards specific Shareholders or on a general basis by the Company in its absolute discretion. Shareholders who are citizens, residents or nationals, of other countries should inform themselves about and observe any applicable legal requirements. It is the responsibility of any such Shareholder to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental or other consents that may be required, the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such jurisdiction. Any such Shareholder will be responsible for payment of any such issue, transfer or other taxes or other requisite payments due by whomsoever payable and the Company, the Broker, Octopus and/or the Receiving Agent and any person acting on either s behalf shall be entitled to be fully indemnified and held harmless by such Shareholder for any such issue, transfer or other taxes as such person may be required to pay. Adviser Commission (r) Financial intermediaries who, acting on behalf of their clients, return valid Enhanced Buyback Facility Application Forms for the Enhanced Buyback Facility bearing their FSA number, will be paid initial commission of 2.5%. In addition, provided that the intermediary continues to act for the client and the client continues to be the beneficial owner of the New Shares, they will normally (where permitted) be paid an annual trail commission of 0.4% of the initial net asset value of their client s holding in New Shares for a period of four years from the allotment date of the relevant New Shares. Financial intermediaries may agree to waive all of their initial commission in respect of an application. If this is the case, then applications will be increased by the amount of initial commission waived and the enlarged application will be applied in subscribing for New Shares at the Issue Price through the Enhanced Buyback Facility. No further fees or commission will be paid in respect of such additional New Shares. Financial intermediaries should keep a record of Enhanced Buyback Application Forms submitted bearing their FSA number to substantiate any claim for introductory commission. Claims for introductory commission must be made and substantiated on the Enhanced Buyback Application Forms. Applications (s) Each Shareholder by whom, or on whose behalf, an Enhanced Buyback Facility Application Form is executed irrevocably undertakes, represents, warrants and agrees to and with the Company and the Broker (so as to bind such Shareholder and their personal or legal representatives, heirs, successors and assigns) that:. the execution of the Enhanced Buyback Facility Application Form constitutes an offer to sell the number of Existing Shares inserted or deemed to be inserted in Box 1 of the Enhanced Buyback Facility Application Form and an offer to subscribe for New Shares, such New Shares to be issued to such Shareholder, subject to the Articles and subject to the terms and conditions set out or referred to in this document (or any supplementary prospectus issued by the Company and filed with the FSA) and the Enhanced Buyback Facility Application Form and that, once lodged, such offers are irrevocable; A3: such Shareholder has full power and authority to tender, sell, assign or transfer the Existing Shares in respect of which such irrevocable offer is accepted (together with all rights attaching thereto) and, when the same are purchased by the Company (through the Broker as its agent), the Company will acquire such Existing Shares free and clear from all liens, charges, encumbrances, equitable interests, rights of pre-emption or other third party rights of any nature and together with all the rights attaching thereto including the right to receive all dividends and other distributions declared, paid or made after the date of purchase; 91

92 . that the execution of the Enhanced Buyback Facility Application Form will, subject to the Enhanced Buyback Facility becoming unconditional, constitute the irrevocable appointment of any Director or officer of, or other person nominated by, the Company as such Shareholder s attorney and agent ( attorney ), and an irrevocable instruction to the attorney, to complete and execute all or any instruments of transfer and/ or other documents at the attorney s discretion in relation to the purchase of the Existing Shares tendered and accepted for purchase and to do all such other acts and things as may in the opinion of such attorney be necessary or expedient for the purpose of, or in connection with, the Enhanced Buyback Facility (and if the appointment of an attorney hereunder shall be unenforceable or invalid or shall not operate so as to afford any Director or officer of the Company the benefit or authority expressed to be given therein, the Shareholder shall with all practicable speed do all such acts and things and execute all such documents that may be required to enable the Company to secure the full benefits of this paragraph);. such Shareholder agrees to ratify and confirm each and every act or thing that may be done or effected by the Receiving Agent, the Company, Octopus and/or the Broker or any of their Directors or any person nominated by them in the proper exercise of its or his or her respective powers and/or authorities hereunder;. in respect of the tendered Existing Shares, such Shareholder will deliver to the Receiving Agent their share certificate(s) and/or other document(s) of title in respect thereof, or an indemnity acceptable to the Company in lieu thereof, or will procure the delivery of such documents to such person as soon as possible after and, in any event, before the closing date or, if earlier, the date of completion of the purchase of Existing Shares and allotment of New Shares;. such Shareholder shall do all such acts and things as shall be necessary or expedient and execute any additional documents deemed by the Company to be desirable, in each case to complete the purchase of the Existing Shares and/or to subscribe for any New Shares issued under the relevant Enhanced Buyback Facility and/or to perfect any of the authorities expressed to be given hereunder;. such Shareholder is a UK Shareholder and its offer to sell Existing Shares pursuant to the Enhanced Buyback Facility and any acceptance thereof, shall not be unlawful under the laws of any jurisdiction;. the execution of the Enhanced Buyback Facility Application Form constitutes a warranty by such Shareholder that the information given by or on behalf of such Shareholder is true and accurate in all respects at the time the Company purchases the Existing Shares and allots the New Shares and that in making the application such Shareholder is not relying on any information or representation in relation to the Company other than that contained in this document (including any supplementary prospectus issued by the Company and filed with the FSA), and that the Shareholder applying to participate in the Enhanced Buyback Facility accordingly agrees that no person responsible solely or jointly for this document or any part thereof (including any supplementary prospectus issued by the Company and filed with the FSA), or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, it will be deemed to have had notice of all information in relation to the Company contained in this document (including any supplementary prospectus issued by the Company and filed with the FSA);. such Shareholder is not, and nor are they applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in sections 67, 70, 93 or 96 (depository receipts and clearance services) of the Finance Act 1986;. the execution of the Enhanced Buyback Facility Application Form constitutes such Shareholder s submission to the exclusive jurisdiction of the courts of England in relation to all matters arising out of or in connection with the Enhanced Buyback Facility and their agreement that nothing shall limit the right of the Company to bring any action, suit or proceeding arising out of or in connection with such Shareholder s application, acceptances of the application and contracts in any other manner permitted by law or any court of competent jurisdiction; 92

93 . such Shareholder agrees that mandates in respect of the dividend investment schemes to which the Existing Shares are mandated and information and authorities in respect of payment of dividends direct to bank accounts be transferred to the New Shares allotted through participating in the Enhanced Buyback Facility. Additional Provisions (t) The Company reserves the absolute right to inspect (either itself or through the Receiving Agent or other agents) all Enhanced Buyback Facility Application Forms, and may consider void and reject any Enhanced Buyback Facility Application Form that does not in the sole judgment of the Company satisfy the terms and conditions of the Enhanced Buyback Facility. If the Enhanced Buyback Facility Application Form is not completed or in the Company s determination (in its absolute discretion) has not been validly completed, provided that the Enhanced Buyback Facility Application Form is otherwise in order and accompanied by all other relevant documents, the tender may be accepted as a valid tender in whole or part at the Company s discretion. The delivery of share certificate(s) for Existing Shares and all other required documents will be at the risk of the Shareholder participating in the Enhanced Buyback Facility. If the relevant Enhanced Buyback Facility is withdrawn or terminated, all documents lodged will be returned to Shareholders by post (at the risk of the Shareholder) within 14 business days. In these circumstances, Enhanced Buyback Facility Application Forms for the Enhanced Buyback Facility will cease to have any effect. (u) (v) (w) (x) Existing Shares acquired by the Company (through the Broker as its agent) pursuant to the Enhanced Buyback Facility will be on-market purchases in accordance with the rules of the London Stock Exchange, the UKLA and CA Existing Shares sold by Shareholders pursuant to the Enhanced Buyback Facility will be acquired with full title guarantee, fully paid and free from all liens, charges, encumbrances and equitable interests, rights of pre-emption or other third party rights of any nature and together with all rights attaching thereto including the right to receive all dividends and other distributions declared, paid or made on or after the date of purchase. The failure of any person to receive a copy of this document (including any supplementary prospectus issued by the Company and filed with the FSA) or the Enhanced Buyback Facility Application Form shall not invalidate any aspect of the Enhanced Buyback Facility. Additional copies of this document and Enhanced Buyback Facility Application Forms can be obtained from the Receiving Agent. No acknowledgement of receipt of any Enhanced Buyback Facility Application Forms, share certificates and/or other documents of title will be given. References in these terms and conditions to a holder of Existing Shares or a Shareholder shall include references to the person or persons executing an Enhanced Buyback Facility Application Form (including as is applicable, to a beneficial shareholder where the Existing Shares are held by a nominee) and, in the event of more than one person executing an Enhanced Buyback Facility Application Form, the provisions of this paragraph shall apply to them jointly and to each of them. The terms of the Enhanced Buyback Facility shall have effect subject to such non-material modifications as the Board sees fit. 93

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95 % OCTOPUS ECLIPSE VCT PLC ENHANCED BUYBACK FACILITY APPLICATION FORM PLEASE NOTE THAT ENHANCED BUYBACK FACILITY APPLICATION FORMS SHOULD ONLY BE SUBMITTED ONCE THE ENHANCED BUYBACK FACILITY HAS OPENED ON 2 NOVEMBER Before completing this Enhanced Buyback Facility Application Form you should read the prospectus issued by the Company dated 28 September 2012 ( Prospectus ). Definitions used in the Prospectus apply herein. This document is important and requires your immediate attention. If you are in any doubt as to what action you should take, in particular, if you have not held your Existing Share for five years, you are recommended to consult a person authorised under the Financial Services and Markets Act 2000 who specialises in advising upon investment in shares and other securities, without delay. The distribution of this and the accompanying documents into certain jurisdictions other than the UK (including, but not limited to, the United States, Canada, Australia, South Africa, Japan or the Republic of Ireland) is or may be restricted by law and therefore persons into whose possession this document and accompanying forms come should inform themselves about, and observe, such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. The Enhanced Buyback Facility is only being made available to UK Shareholders on the register on 1 November 2012 and is conditional on the approval of Resolutions 5 and 10 to be proposed at the General Meeting to be held on 23 October If the requisite Resolutions are not approved, the Enhanced Buyback Facility will be withdrawn. Target VCT Shareholders can only participate in the Enhanced Buyback Facility if New Shares in respect of their relevant Scheme have been allotted and registered into the register of members of the Company by 1 November Shareholders who do not wish to participate in the Enhanced Buyback Facility should take no further action. AN APPLICATION UNDER THE ENHANCED BUYBACK FACILITY MAY ONLY BE MADE BY THE SHAREHOLDER(S) ON THE REGISTER ON 1 NOVEMBER IT IS NOT A NEGOTIABLE DOCUMENT OR A DOCUMENT OF TITLE AND CANNOT BE TRADED. This Enhanced Buyback Facility Application Form is to UK Shareholder(s) and cannot be sold, assigned, transferred, or split. Nominees who wish to participate in respect of multiple beneficial shareholders should contact Octopus Investments Limited (contact details below). Title: Mr/Mrs/Miss/Other: Forename(s): Surname: Address: Box 1A Insert in this box the number of Existing Shares for which your application is for if less or more than your Basic Entitlement SECTION 1 TO BE COMPLETED BY ALL SHAREHOLDERS OR Telephone (mobile): Telephone (home): National Insurance number: Date of Birth: Box 1B Place a cross [x] in this box to apply for your Basic Entitlement 1. If you wish to apply for your full holding of Existing Shares, please insert such number of Existing Shares in Box 1A. If you wish to apply for a differing number of Existing Shares than your Basic Entitlement, please insert the number of whole Existing Shares you wish to apply for (including your Basic Entitlement if applying for more than this amount). 2. If you wish to apply to participate for your Basic Entitlement only (i.e. 50% of your holding of Existing Shares), please place a cross Box 1B. 3. Please note that your shareholding may have changed following the merger. Completed Application Forms for the Enhanced Buyback Facility must be posted, together with existing share certificates (for Target VCT Shareholders these are the new share certificates issued by the Company following completion of the merger), using the pre-paid envelope provided or alternatively to Octopus Investments Limited, 20 Old Bailey, London EC4M 7AN by post or hand delivered (during normal business hours). Shareholders who have queries in respect of the Enhanced Buyback Facility should contact Octopus Investments Limited, telephone: between the hours of 8.00 a.m. and 6.00 p.m. on any Business Day. Shareholders who have queries about their holdings and/or date(s) of acquisition should contact the Company registrars, Capita Registrars, telephone: from within the UK or on if calling from outside the UK. Calls to the number cost 10p per minute from a BT landline. Other network providers may vary. Lines are open Monday to Friday 9.00 a.m p.m. (London time). No financial, legal, tax or investment advice will be given. 95

96 ALL SHAREHOLDERS - PLEASE SIGN AND DATE THE ENHANCED BUYBACK FACILITY APPLICATION FORM AT SECTION 2. IF YOUR APPLICATION IS VIA A FINANCIAL INTERMEDIARY, PLEASE ENSURE SECTION 4 IS COMPLETED BY SUCH INTERMEDIARY BEFORE BEING SUBMITTED. APPLICATIONS BY A NOMINEE WHERE THE PROCEEDS ARE TO BE REINVESTED FOR A BENEFICIAL SHAREHOLDER - PLEASE ARRANGE FOR THE BENEFICIAL SHAREHOLDER TO COMPLETE, SIGN AND DATE SECTION 3. SECTION 2 TO BE COMPLETED BY ALL SHAREHOLDERS By signing this Enhanced Buyback Facility Application Form at Section 2 or 3, you agree to sell the number of Existing Shares detailed in Box 1 at the Tender Price and have the net proceeds of sale used to purchase New Shares at the Issue Price in your name or, if completed, the name of the person detailed in Section 3 on the terms and conditions of the Enhanced Buyback Facility contained in the Prospectus. In the event of inadequate existing share certificates being received, applications will be rejected. EXECUTION BY INDIVIDUALS - Signed and delivered as a deed by: Signature(s) of Applicant(s) Signature(s) of Witness(es) Name and address of Witness(es) EXECUTION BY COMPANIES - Executed and delivered as a deed by the company named below Alternative 1 Director and Director/Secretary Name Signature Director Director/Secretary* (*delete as appropriate) or Alternative 2 Director and Witness Name Address Signature Director Not required Witness 96

97 % Data Protection Octopus Investments Limited and Capita Registrars Limited will use the information you give for administration, research and statistical purposes. Information provided by you will be held in confidence by Octopus Investments Limited and Capita Registrars Limited and will not be passed on to any other product or service companies. Your details may be used by Octopus Investments Limited and Capita Registrars Limited to send you information on other products and services they offer. If you would prefer not to receive such information, please tick this box. truept SECTION 3 ONLY TO BE COMPLETED FOR APPLICATIONS BY A NOMINEE WHERE THE PROCEEDS ARE TO BE REINVESTED FOR A BENEFICIAL SHAREHOLDER Beneficial shareholder to complete details. Title: Mr/Mrs/Miss/Other: Forename(s): Surname: Address: Telephone (work): Telephone (home): National Insurance number: Date of Birth: By signing this Enhanced Buyback Facility Application Form the beneficial shareholder agrees to subscribe for New Shares at the Issue Price (such subscription monies to be satisfied from the net proceeds of sale of the Shares) on the terms and conditions of the Enhanced Buyback Facility contained in the Prospectus. In the event of inadequate information being received, applications will be rejected. Evidence of identity may be requested. Signed and delivered as a deed by: Telephone: Signature of Applicant Signature of Witness Name and address of Witness Nominee contact details for queries 97

98 SECTION 4 TO BE COMPLETED BY FINANCIAL INTERMEDIARIES Financial Advisers to complete details for the purposes of initial commission and annual trail commission. Name of Financial Adviser: Title: Mr/Mrs/Miss/Other Forename(s): FSA No.: Surname: Telephone: Name of Administrator/Support Staff: Title Mr/Mrs/Miss Forename(s): Surname: If commission is to be paid to a network or head office, please give details: Waived Commission Please tick this box if you would like your initial commission of 2.5% to be waived and reinvested for additional New Shares for your client Intermediary Bank Details Account name: Bank/Building Society: Sort Code: Account Number: The Company, Octopus Investments Limited and Capita Registrars Limited accept no liability for any instruction that does not comply with these conditions. 98

99 CORPORATE INFORMATION Directors Viscount Cobham (Chairman) Roger Penlington Matt Cooper Registered Office 20 Old Bailey London EC4M 7AN Telephone: (general) (client services) Website: Company Number: A3: 1.1 A1: A3: A3: 10.1 Investment Manager and Administrator Company Secretary Octopus Investments Limited Patricia Standaloft ACIS 20 Old Bailey 20 Old Bailey London London EC4M 7AN EC4M 7AN Solicitors SGH Martineau LLP No. 1 Colmore Square Birmingham B4 6AA Sponsor Matrix Corporate Capital LLP One Vine Street London W1J 0AH Registrars Reporting Accountant Capita Registrars Limited Scott-Moncrieff The Registry Exchange Place 3 34 Beckenham Road Semple Street Beckenham Edinburgh Kent EH3 8BL BR3 4TU Auditors and Tax Advisers Broker Grant Thornton UK LLP Matrix Corporate Capital LLP 3140 Rowan Place One Vine Street John Smith Drive London Oxford Business Park South W1J 0AH Oxford OX4 2WB 99

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