Acorn Income Fund Limited

Transcription

1 Proof 3: THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or as to the action you should take, you are recommended to immediately seek your own personal financial advice from your stockbroker or other independent financial adviser authorised pursuant to the FSMA, who specialises in advising on the acquisition of securities. This document comprises a prospectus relating to Acorn Income Fund Limited (the Company ) prepared in accordance with the Prospectus Rules of the Financial Conduct Authority made under section 73A of the FSMA. A copy of this document has been filed with the Financial Conduct Authority and has been made available to the public in accordance with Rule 3.2 of the Prospectus Rules. Application will be made to the Financial Conduct Authority and to the London Stock Exchange respectively for admission of the New Ordinary Shares and New ZDP Shares: (i) to the Official List (by way of a premium listing under Chapter 15 of the Listing Rules in the case of the New Ordinary Shares and by way of a standard listing under Chapter 14 of the Listing Rules in the case of the New ZDP Shares); and (ii) to the London Stock Exchange s main market for listed securities (together Admission ). It is expected that Admission will become effective and that unconditional dealings in the New Ordinary Shares and the New ZDP Shares will commence on the London Stock Exchange during the period from 29 May 2013 to 7 May The Company is authorised as an authorised closed-ended investment scheme by the Guernsey Financial Services Commission under Section 8 of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and the Authorised Closed-Ended Investment Schemes Rules Notification of the proposed Initial Placing, Offer for Subscription and Placing Programme has been made to the Guernsey Financial Services Commission. Prospective investors should read the entire document (together with the documents incorporated by reference herein) and, in particular, the Risk Factors on pages 15 to 21, when considering an investment in the New Ordinary Shares and/or the New ZDP Shares. Acorn Income Fund Limited (a company incorporated and registered in Guernsey with registered number 34778) Issues of up to 14 million New Ordinary Shares and up to 19 million New ZDP Shares Initial Placing and Offer for Subscription of up to 7 million New Ordinary Shares and up to 9.6 million New ZDP Shares Placing Programme Sponsor Numis Securities Limited This document does not constitute an offer to buy or to subscribe for, or the solicitation of an offer to buy or subscribe for, New Ordinary Shares and/or New ZDP Shares in any jurisdiction in which such offer or solicitation is unlawful. In particular the New Ordinary Shares and the New ZDP Shares offered by this document have not been, and will not be, registered under the US Securities Act of 1933, as amended (the Securities Act ) or registered or qualified for sale under the laws of any state of the United States or under the applicable laws of any of Canada, Australia, the Republic of South Africa or Japan and, subject to certain exceptions, may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as such term is defined in Regulation S under the Securities Act) or to any national, resident or citizen of Canada, Australia, the Republic of South Africa or Japan. Neither this document nor any copy of it may be distributed directly or indirectly to any persons with addresses in Canada, Australia, the Republic of South Africa or Japan, or to any corporation, partnership or other entity created or organised under the laws thereof, or in any other country outside the United Kingdom where such distribution may lead to a breach of any legal or regulatory requirement. The Company will not be registered as an investment company under the US Investment Company Act of 1940, as amended. This document, the New Ordinary Shares and the New ZDP Shares have not been recommended, approved or disapproved by any US federal or state securities commission or regulatory authority. Furthermore, none of such authorities has opined on the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence. Numis Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and for no-one else in connection with the Issues and will not be responsible to any other person for providing the protections afforded to clients of Numis Securities Limited or for providing advice in connection with the Issues, the contents of this document or any matters referred to in this document. Numis Securities Limited is not responsible for the contents of this document. This does not exclude or limit any responsibilities which Numis Securities Limited may have under the FSMA or the regulatory regime established thereunder. The Directors of the Company, whose names appear on page 27 of this document, and the Company each accept responsibility for the information contained in this Prospectus. Having taken all reasonable care to ensure this is the case, the information contained in this Prospectus is, to the best of the knowledge of the Directors and the Company, in accordance with the facts and contains no omission likely to affect its import. Dated: 8 May 2013

2 CONTENTS SUMMARY... 3 RISK FACTORS FORWARD LOOKING STATEMENTS CONSEQUENCES OF A STANDARD LISTING OF THE ZDP SHARES ISSUE STATISTICS INITIAL PLACING AND OFFER STATISTICS EXPECTED TIMETABLE OF PRINCIPAL EVENTS DIRECTORS AND ADVISERS PART 1 INFORMATION ON THE ISSUES PART 2 THE INITIAL PLACING AND OFFER FOR SUBSCRIPTION PART 3 THE PLACING PROGRAMME PART 4 INFORMATION ON THE COMPANY PART 5 DIRECTORS AND CORPORATE GOVERNANCE PART 6 PORTFOLIO INFORMATION PART 7 FINANCIAL AND OTHER INFORMATION ON THE COMPANY PART 8 PRINCIPAL BASES AND ASSUMPTIONS IN RESPECT OF THE INITIAL PLACING AND OFFER... PART 9 ADDITIONAL INFORMATION PART 10 TAXATION PART 11 PART 12 TERMS AND CONDITIONS OF APPLICATION UNDER THE INITIAL PLACING AND PLACING PROGRAMME... TERMS AND CONDITIONS OF APPLICATION UNDER THE OFFER FOR SUBSCRIPTION... PART 13 DEFINITIONS APPLICATION FORM NOTES ON COMPLETING THE APPLICATION FORM

3 c108323pu020 Proof 3: B/L Revision: SUMMARY Summaries are made up of disclosure requirements known as Elements. These Elements are numbered in Sections A E (A.1 E.7). This summary contains all the Elements required to be included in a summary for these types of securities and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the types of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of not applicable. Section A Introduction and Warnings A.1 Warning This summary should be read as an introduction to the Prospectus. Any decision to invest in the securities should be based on consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the Prospectus before legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the 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 the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities. A.2 Subsequent resale of securities or final placement of securities through financial intermediaries Not applicable. Section B The Company B.1 Legal and commercial name of the issuer B.2 Domicile and legal form Acorn Income Fund Limited. Acorn Income Fund Limited was incorporated in Guernsey with an unlimited life on 5 January 1999 with registered number under the Companies (Guernsey) Laws 1994 to 1996, as amended, as an authorised closed-ended investment company. B.5 Group description Not applicable; the Company is not part of a group. 3

4 c108323pu020 Proof 3: B/L Revision: B.6 Major shareholders So far as is known to the Company by virtue of the notifications made to it pursuant to the Disclosure and Transparency Rules, as at the Latest Practicable Date the following persons held directly or indirectly three per cent. or more of the Company s voting rights: Number of voting rights held Percentage of voting rights Name Cheviot Asset Management 649, % Rathbone Brothers 455, % Brewin Dolphin Limited 453, % Charles Stanley Group plc 427, % JP Morgan 425, % None of the shareholders referred to in the table above has different voting rights from any other holder of shares in respect of any shares held by them. The Company is not aware of any person who directly or indirectly, jointly or severally, owns or could exercise control over the Company. B.7 Financial statements Selected Financial Information The key audited figures that summarise the financial condition of the Company in respect of the year ended 31 December 2012 (and the corresponding figures for the years ended 31 December 2011 and 2010) which have been extracted directly on a straightforward basis from the historical information are set out in the following table. Year Ended 31 December Capital Total non-current assets (investments) ( 000) 20,713 22,043 34,359 Total assets ( 000) 21,572 28,257 35,396 Total liabilities ( 000) 4,463 12,018 12,603 Net assets 17,110 16,239 22,793 Net asset value per Ordinary Share (p) (per IFRS and Articles) Net asset value per ZDP Share (p) (per IFRS) Net asset value per ZDP Share (p) (per Articles) Year Ended 31 December Earnings and Dividends Return per Ordinary Share (p) (1.86) Dividends per Ordinary Share (p) Return per ZDP Share (p) Over the period from 1 January 2010 to 31 December 2012, the period covered by the historical financial information, the Company has repaid a 6 million bank loan and issued 12 million ZDP Shares. Save for this, and changes in the market value of the Company s investments, there was no significant change in the Company s financial condition and operating results during or subsequent to the period covered by the historical financial information. 4

5 c108323pu020 Proof 3: B/L Revision: B.8 Selected pro forma financial information B.9 Profit forecast or estimate B.10 Qualifications in the audit report B.11 Insufficiency of working capital B.34 Description of investment objective, policy and investment restrictions Not applicable; no pro forma financial information is included in this document. Not applicable; no profit forecast is included in this document. Not applicable; there have been no qualifications in the audit reports on the historical financial information. Not applicable; the Company is of the opinion that it has sufficient working capital for its present requirements, that is, for at least 12 months from the date of this document. The investment objective of the Company is to provide shareholders with a high income and also the opportunity for capital growth. The Company s investments are held in two portfolios. Its assets comprise investments in equities and fixed interest securities in order to achieve its investment objective. Approximately 70 per cent. to 80 per cent. of its assets are invested in smaller capitalised United Kingdom companies, admitted to the Official List of the FCA and traded on the London Stock Exchange or traded on AIM at the time of investment. The Company also aims to enhance income for Ordinary Shareholders by investing approximately 20 per cent. to 30 per cent. of its assets in high yielding instruments which are predominantly fixed interest securities but may include up to 15 per cent. of the Company s overall portfolio (measured at the time of acquisition) in high yielding investment company shares. The proportion of the overall portfolio held in the Smaller Companies Portfolio and the Income Portfolio varies from day to day as the market prices of investments move. The Directors retain discretion to transfer funds from one Portfolio to the other and generally expect between 70 per cent. to 80 per cent. of the investments to be held in the Smaller Companies Portfolio. While the Company s investment policy is to spread risk by maintaining diversified Portfolios, there are no restrictions on the proportions of either of the Portfolios which may be invested in any one geographical area, asset class or industry sector. However, not more than 7.5 per cent. of the Company s gross assets may be invested in securities issued by any one company as at the time of investment, save that (i) in respect of the Income Portfolio only, investments may be made in other investment funds subject only to the restriction set out in paragraph (c) of the paragraph headed Investment Restrictions below; and (ii) in respect of the Smaller Companies Portfolio only, provided that not more than 10 per cent. of the Company s gross assets are invested in securities issued by any one company at any time, the 7.5 per cent. limit may be exceeded on a short term basis, with Board approval, where a company whose securities form part of the Smaller Companies portfolio issues new securities (for example by way of a rights issue). The Company s capital structure is such that the underlying value of assets attributable to the Ordinary Shares is geared relative to the rising capital entitlements of the ZDP Shares. The Company s gearing policy is not to employ any gearing through long-term bank borrowing. Save with the prior sanction of ZDP Shareholders, the Company will incur no indebtedness other than short term borrowings in the normal course of business such as to settle share trades or borrowings to finance the redemption of the ZDP Shares. 5

6 c108323pu020 Proof 3: B/L Revision: Derivatives The Company may invest in derivatives, money market instruments and currency instruments including contracts for differences, futures, forwards and options. These investments may be used for hedging positions against movements in, for example, equity markets, currencies and interest rates. In addition, these instruments will only be used for efficient portfolio management purposes. The Company will not use such instruments to engage in trading transactions. The Company will not maintain derivative positions should the total underlying exposure of these positions exceed one times adjusted total capital and reserves. Investment restrictions For so long as required by the Listing Rules in relation to closed-ended investment companies, the Company has adopted the following investment and other restrictions: (a) the Company will 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; (b) the Company will not conduct any significant trading activity; and (c) not more than 10 per cent. in aggregate of the value of the total assets of the Company at the time the investment is made will be invested in other listed closed-ended investment funds. The Listing Rules provide an exception to this restriction to the extent that those investment funds have stated investment policies to invest no more than 15 per cent. of their total assets in other listed closedended investment companies. B.35 Borrowing and/or leverage limits B.36 Regulatory status of the Company B.37 Profile of typical investors The Company has no restrictions on gearing or borrowings in its Articles. ZDP Shares are treated as debt under applicable International Accounting Standards. In order to protect the interests of ZDP Shareholders, the Company will not, without the prior sanction of the ZDP Shareholders at a separate class meeting, incur any bank borrowings (other than short term indebtedness in the normal course of business, such as when settling share transactions) except where such borrowings are for the purpose of paying the Final Capital Entitlement due to holders of ZDP Shares. However, this will not prevent gearing increasing as a result of investments falling in value. There are no set gearing limits. The Company is authorised as an authorised closed-ended investment scheme by the Guernsey Financial Services Commission under Section 8 of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and the Authorised Closed-Ended Investment Scheme Rules The Company is not regulated by the FCA but, as a company with securities admitted to listing on the Official List, is subject to the Listing Rules, Prospectus Rules, Disclosure and Transparency Rules and the rules of the London Stock Exchange. It is expected that investors in the New Ordinary Shares and the New ZDP Shares will typically be professional investors and professionally advised private investors. 6

7 c108323pu020 Proof 3: B/L Revision: B.38 Investment of 20 per cent. or more of gross assets in single underlying asset or collective investment undertaking. B.39 Investment of 40 per cent. or more of gross assets in another collective investment undertaking. B.40 The investment manager and other service providers Not applicable; the Company may not invest more than 20 per cent. of its gross assets in a single underlying asset or collective investment undertaking. Not applicable; the Company may not invest more than 40 per cent. of its gross assets in another collective investment undertaking. Sponsor and placing agent Numis has agreed to act as sponsor to the Issues and to use its reasonable endeavours to procure subscribers for the New Ordinary Shares and the New ZDP Shares. Numis will be entitled to receive a corporate finance fee of between 35,000 and 150,000 depending on the Gross Proceeds of the Initial Placing and Offer. In addition, Numis will be entitled to a variable commission of between 0.82 per cent. and 1.23 per cent. of the Gross Proceeds of the Issues together with reimbursement for its out-of-pocket expenses, including legal costs, in connection with the Issues, together, in each case, with applicable VAT. The corporate finance fee and the commission set out above are only payable if Admission occurs. Investment Manager The Company has appointed Premier Asset Management (Guernsey) Limited as the Investment Manager. The Investment Manager is entitled to receive a management fee of 0.7 per cent. per annum of the Company s total assets, calculated monthly and payable quarterly in arrears, out of which it pays fees to the Investment Advisers. The Investment Manager is also paid a shareholder communication and support fee, currently 3,100 per annum. The Investment Manager is also potentially entitled to a performance fee, of 15 per cent. of any excess of the Net Asset Value per Ordinary Share over a benchmark NAV per share multiplied by the time weighted number of shares in issue during the relevant financial period. The Investment Manager has agreed that if the total expense ratio of the Company (ignoring any performance fee and any non-routine professional expenses) for any financial period will exceed 1.5 per cent. of the Company s total assets it will reimburse, to the extent already paid, or waive that part of its management fee and/or performance fee paid or payable in respect of that relevant financial period so as to reduce the total expense ratio of the Company for that period to 1.5 per cent. of total assets, provided always that the Investment Manager shall in any event be entitled to a minimum management fee of 100,000 per annum. In addition to the fees referred to above, the Investment Manager is also entitled to be reimbursed the costs of delegating administration services. The total amount it may be reimbursed shall not exceed 0.12 per cent. per annum of the Company s total assets but is subject to a minimum annual payment of 55,000. The Investment Manager has delegated responsibility for the management of the Portfolios to the Investment Advisers. The Investment Advisers are not engaged by the Company. 7

8 c108323pu020 Proof 3: B/L Revision: Registrar and Administrator The Company has appointed Anson Registrars Limited as its registrar and administrator. In its capacity as Registrar it is entitled to an annual fee of the higher of (a) 3,000 per register per annum or (b) the sum of 5 per shareholder per annum, 60 pence per intra CREST transfer, 1.50 per CREST stock deposit/withdrawal and 10 per non-crest transfer. The Registrar is also entitled to fees for the provision of a UK transfer agent facility of 1,500 per annum and fees for processing dividend payments and proxy appointments. The Registrar is entitled to receive reimbursement for disbursments incurred in connection with the services provided under the agreement. In its capacity as administrator, it is entitled to receive an annual fee for its services of 0.12 per cent. of total assets, subject to a minimum annual fee of 55,000. B.41 Identity and regulatory status of the investment manager and the custodian B.42 Valuation and publication of the Company s Net Asset Value The Investment Manager is regulated by the Guernsey Financial Services Commission and is licensed under The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, to carry on controlled investment business. The Investment Advisers are each authorised and regulated by the FCA. The Custodian is regulated by the Guernsey Financial Services Commission and is licensed under The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, to carry out controlled investment business in the Bailiwick of Guernsey. The Administrator is responsible for calculating the unaudited NAV per Ordinary Share which is calculated weekly at the close of business on each Friday and at the end of each month and announced through an RIS on the following business day. B.43 Cross liability Not applicable; the Company is not an umbrella collective investment undertaking. B.44 Collective investment undertakings which have not commenced operations B.45 Description of the Company s portfolio Not applicable; the Company has commenced operations. Gross asset value As at the Latest Practicable Date, the Portfolios comprised 71 investments with an aggregate value, on that date, of million, valued as at their closing bid prices in respect of listed investments and based on the Directors fair value valuations in respect of unlisted investments in accordance with the Company s accounting policies. 8

9 c108323pu020 Proof 3: B/L Revision: Top 15 holdings (unaudited) The top fifteen holdings in each Portfolio and the percentage each represents of the Company s gross assets (in both Portfolios) at the Latest Practicable Date were: Smaller Companies Portfolio Valuation GBP Total Assets % Tyman plc 1,782, % VP plc 1,555, % British Polythene Industries 1,553, % Diploma plc 1,488, % Secure Trust Bank plc 1,452, % Castings plc 1,412, % James Halstead plc 1,401, % Consort Medical plc 1,360, % Acal plc 1,287, % Brewin Dolphin Holdings plc 1,207, % UK Mail Group plc 1,201, % Devro plc 1,195, % RPC Group plc 1,193, % Lookers plc 1,131, % Harvey Nash Group plc 1,095, % 19,973, % Valuation GBP Total Assets % Income Portfolio Real Estate Credit Preference Shares NPV 424, % GE Capital Funding 8% 14/01/ , % Credit Suisse 7.875% 24/02/ , % GLI Finance Limited 329, % Kelda Finance 3 plc 5.75% 17/02/ , % Standard Life UK 3.5% CULS 31/03/ , % Lloyds TSB 11 7 / 8 16/12/ , % F&C Finance plc 9% 20/12/ , % Jurdica Ord NPV 273, % Unite Group 6.125% 12/06/ , % Aviva plc % Perp (2020) 256, % Fidelity International 7.125% 13/02/ , % Marks & Spencer 4.75% 12/06/ , % SSE plc 6.25% 27/08/ , % Punch Taverns 7.27% 15/07/22 206, % 4,308, % B.46 Net Asset Value At the Latest Practicable Date, the Portfolios had a value of million, of which per cent. was represented by the Smaller Companies Portfolio and per cent. by the Income Portfolio. The aggregate capital entitlement of the ZDP Shares was million (equivalent to pence per ZDP Share) and the Company s net assets at that date were million (equivalent to pence per Ordinary Share). Section C Securities C.1 Type and class of securities The type and class of securities being offered by the Company pursuant to the Initial Placing, Offer for Subscription and Placing Programme are New Ordinary Shares of nominal value 1 pence each (ISIN: GB ) and New ZDP Shares of nominal value 1 pence each 9

10 c108323pu020 Proof 3: B/L Revision: (ISIN: GG00B4W1FT21). Application will be made to the FCA and to the London Stock Exchange respectively for admission of the New Ordinary Shares and New ZDP Shares: (i) to the Official List (by way of a premium listing under Chapter 15 of the Listing Rules in the case of the New Ordinary Shares and by way of a standard listing under Chapter 14 of the Listing Rules in the case of the New ZDP Shares); and (ii) to the London Stock Exchange s main market for listed securities. C.2 Currency denomination of the Shares C.3 Details of the share capital C.4 Rights attaching to the Shares C.5 Restrictions on the transferability of Shares Sterling. The issued share capital of the Company as at the date of this document, all of which is fully paid, is as follows: Issued Number Nominal ( ) Ordinary Shares 8,939, ZDP Shares 12,000, Income All dividends paid by the Company are attributable to the Ordinary Shares only. Capital On a return of capital: (i) first, there shall be paid to the Ordinary Shareholders any undistributed income standing to the revenue reserves; (ii) second, there shall be paid to the ZDP Shareholders an amount equal to 100 pence per ZDP Share as increased each day from 21 December 2011 up to and including 31 January 2017 at the daily compound rate which results in a final capital entitlement of 138 pence per ZDP Share on 31 January 2017; and (iii) third, there shall be paid to the Ordinary Shares the surplus assets of the Company available for distribution. Voting At a general meeting of the Company each Ordinary Shareholder has one vote on a show of hands and one vote for every Ordinary Share held on a poll. The ZDP Shares do not normally carry the right to vote at general meetings of the Company. Their holders will, however, have a right to vote in certain limited circumstances and their separate approval as a class will be required for certain proposals which would be likely to affect their position materially. Rights of redemption The Ordinary Shares carry no right of redemption. The ZDP Shares will be redeemed on the ZDP Repayment Date. The Board may, in its absolute discretion and without giving a reason, refuse to register a transfer of any Share in certificated form or uncertificated form which is not fully paid up or on which the Company has a lien provided that this would not prevent dealings from taking place on an open and proper basis. The Directors may also refuse to register any transfer of Shares which is prohibited by the provisions described above, or any transfer of Shares unless such transfer is in respect of only one class of Shares, it is in favour of a Permitted Transferee (as defined in the Articles), it is in favour of a single transferee or no more than four joint transferees, is delivered for registration to the Company s registered office or such other place as the Board may decide, and is accompanied by the relevant share certificate(s) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer. 10

11 c108323pu020 Proof 3: B/L Revision: C.6 Application for admission to trading on a regulated market Application will be made to the FCA and to the London Stock Exchange respectively for admission of the New Ordinary Shares and New ZDP Shares: (i) to the Official List (by way of a premium listing under Chapter 15 of the Listing Rules in the case of the New Ordinary Shares and by way of a standard listing under Chapter 14 of the Listing Rules in the case of the New ZDP Shares); and (ii) to the London Stock Exchange s main market for listed securities. It is expected that Admission will become effective and that unconditional dealings in the New Ordinary Shares and the New ZDP Shares will commence on the London Stock Exchange during the period from 29 May 2013 to 7 May C.7 Dividend policy The ZDP Shares do not carry a right to a dividend. Dividends may be paid to holders of Ordinary Shares whenever the financial position of the Company, in the opinion of the Directors, justifies such payment, subject to the Company being able to satisfy the solvency test, as defined under the Law, immediately after payment of such dividend. The Company may by ordinary resolution from time to time declare dividends. The dividend policy adopted by the Board is to pay dividends to holders of Ordinary Shares quarterly in March, June, September and December. Section D Risks D.1 Key information on the key risks that are specific to the Company D.3 Key information on the key risks that are specific to the Shares * Investing in smaller companies, including AIM companies, can carry greater risks than those usually associated with larger capitalised companies. Certain of the investments in the Portfolios may therefore be illiquid. The Company may not be able to immediately dispose of such investments if it determines that such a sale would be in its best interests. * The Company s future performance depends on the success of its strategy, the skill and judgement of the Investment Manager and of the Investment Advisers. The departure of a key employee may have an adverse effect on the performance of the Company. * The Company may use derivatives to hedge exposure to currency risk and interest rate risk. No assurance can be given that any hedging strategies which may be used by the Company will be successful under all or any market conditions and, if unsuccessful, could have an adverse effect on the Company s financial position. * The Income Portfolio will primarily contain fixed interest securities. Bond prices and interest rates are inversely correlated. Thus, when interest rates increase, the price of a bond with a fixed coupon will decline. Any rise in interest rates may affect the returns on such investments to the Company. * The Ordinary Shares are geared by the ZDP Shares and should be regarded as carrying above average risk since a positive Net Asset Value for the Ordinary Shareholders will be dependent upon the Company s assets being sufficient to meet those prior entitlements of the holders of ZDP Shares. * Ordinary Shareholders do not have a right for their Ordinary Shares to be redeemed and those Ordinary Shareholders wishing to realise their investment will be required to dispose of their Ordinary Shares on the stock market. * Market liquidity in the shares of companies such as the Company is less than market liquidity in shares issued by larger companies traded on the London Stock Exchange. There can be no guarantee that a liquid market will exist for the Ordinary Shares or the ZDP 11

12 c108323pu020 Proof 3: B/L Revision: Shares which may prevent any holder of Ordinary Shares or ZDP Shares being prevented from disposing of such shares at a price or at such time that it wishes. * The market values of ZDP Shares will be affected by changes in general interest rates, with upward movements in interest rates likely to lead to reductions in the market value of ZDP Shares. * Although the holders of ZDP Shares have a prior entitlement to the other assets of the Company (after payment of its liabilities) on a winding-up, if the gross assets of the Company fall at a rate which erodes the Cover to a ratio of less than 1 over the planned life of the ZDP Shares, this would result in a lower payment than the Fixed Capital Entitlement on the ZDP Repayment Date. * Application will be made for the New ZDP Shares to be admitted to a standard listing on the Official List. A standard listing affords ZDP Shareholders a lower level of regulatory protection than that afforded to investors in companies with premium listings on the Official List. * In certain circumstances, such as a major fall in the capital value of the Portfolios such that the Final Capital Entitlement of the ZDP Shares is significantly uncovered but where the Company s Portfolios are still generating revenue, the interests of ZDP Shareholders and the Ordinary Shareholders may conflict. In such circumstances, the Directors may find it impossible to meet fully both sets of expectations and so will need to act in a manner which they consider to be fair and equitable to both Ordinary Shareholders and ZDP Shareholders but having regard to the entitlements of each class of Shares. * The Finance (No.2) Bill 2013 contains new rules (the New Rules ) intended to make returns which are economically equivalent to interest subject to income tax as income. The New Rules have not yet been enacted, nor has HMRC published any draft guidance. HMRC consider that the New Rules are in principle capable of applying to zero dividend preference shares. However there are to be important exceptions which, as things stand at present, the Directors believe may apply to the New ZDP Shares. ZDP Shareholders should note that the position could change, possibly quite significantly, before the New Rules are finally enacted. Section E The Issues E.1 Proceeds and expenses of the Issues The Net Proceeds of the Initial Placing and Offer are dependent on subscriptions received but, assuming the Initial Placing and Offer is fully subscribed and therefore that Gross Proceeds of 30,000,000 are raised, would be approximately 29,630,000, with expenses (including any commission) of approximately 370,000. It is expected that the expenses of the Initial Placing and Offer will be covered by the premium generated on issuing the New ZDP Shares at the Initial Placing and Offer Price. The Net Proceeds of the Placing Programme are dependent on subscriptions received pursuant to both the Initial Placing and Offer and the Placing Programme. Assuming that Gross Proceeds of 30,000,000 are raised under the Initial Placing and Offer and Gross Proceeds of a further 30,000,000 are raised under the Placing Programme, the Net Proceeds of the Placing Programme would be approximately 29,650,000 with expenses (including any commission) of approximately 350,000. It is expected that the expenses directly 12

13 c108323pu020 Proof 3: B/L Revision: attributable to the Placing Programme will be met out of the Gross Proceeds of the Placing Programme and will be covered by any premium at which the New Ordinary Shares and the New ZDP Shares are issued under the Placing Programme. E.2a Reasons for the Issues, use of proceeds and estimated net amount of proceeds The Directors believe that there is likely to be demand for the Ordinary Shares and the ZDP Shares, and that such demand may not be capable of being satisfied in the secondary market other than at a significant premium to NAV. The Company is therefore proposing the Initial Placing and Offer of New Ordinary Shares and New ZDP Shares, and the Placing Programme which is designed to enable the Company to satisfy subsequent demand for New Ordinary Shares and New ZDP Shares. The Directors intend to apply the Net Proceeds of the Initial Placing and Offer and the Placing Programme in making investments in accordance with the Company s investment objective and policy. The Net Proceeds of the Initial Placing and Offer are dependent on subscriptions received but, assuming the Initial Placing and Offer is subscribed as to 30,000,000 would be approximately 29,630,000 with expenses (including any commission) of approximately 370,000. The Net Proceeds of the Placing Programme are dependent on subscriptions received pursuant to both the Initial Placing and Offer and the Placing Programme. Assuming that Gross Proceeds of 30,000,000 are raised under the Initial Placing and Offer and Gross Proceeds of a further 30,000,000 are raised under the Placing Programme, the Net Proceeds of the Placing Programme only would be approximately 29,650,000 with expenses (including any commission) of approximately 350,000. E.3 Terms and conditions of the Offer for Subscription The Offer for Subscription is conditional, inter alia, on: (i) the Placing and Offer Agreement becoming wholly unconditional (save as to Admission) and not having been terminated in accordance with its terms prior to Admission; and (ii) Admission of the Initial Placing and Offer Shares occurring by 8.00 a.m. on 29 May 2013 (or such later date as the Company and Numis may agree in writing, being not later than 8.00 a.m. on 30 June 2013). The Offer for Subscription is not being underwritten. E.4 Material interests Not applicable; there are no interests that are material to the Initial Placing, Offer for Subscription or Placing Programme. E.5 Selling securities holders and lock-up agreements Not applicable; there are no persons offering to sell shares in the Company and there are no lock-up agreements in place. E.6 Dilution The issue of New Ordinary Shares pursuant to the Initial Placing and Offer will be at a price equal to the NAV per Ordinary Share to prevent any dilution. While the Company is only permitted to issue New ZDP Shares in circumstances where: (i) the Cover Test is met; or (ii) where Cover is maintained or is otherwise increased, such additional issues of New ZDP Shares may dilute existing holders voting interests. 13

14 c108323pu020 Proof 3: B/L Revision: E.7 Estimated expenses charged to investors by the Company Investors will not be charged a fee in addition to the applicable Issue Price in order to subscribe for New Ordinary Shares and/or New ZDP Shares under the Issues. It is expected that the expenses of the Initial Placing and Offer (expected to be 370,000 assuming Gross Proceeds of 30,000,000 are raised) will be covered by the premium generated on issuing the New ZDP Shares at the Initial Placing and Offer Price. It is expected that the expenses of the Placing Programme (expected to be 350,000 assuming Gross Proceeds of a further 30,000,000 are raised) will be covered by any premium at which the New Ordinary Shares and the New ZDP Shares are issued under the Placing Programme. 14

15 c108323pu030 Proof 3: _12:43 B/L Revision: RISK FACTORS The Company s business, financial condition, performance, prospects, results and/or Share price could be materially and adversely affected by any of the risks described below. If any of the adverse events described below actually occur, investors may lose all or part of their investment. In addition to the other information set out in this document, the risks described below should be carefully considered by investors and prospective investors prior to making any investment decision relating to the New Ordinary Shares and/or the New ZDP Shares. The risks set out below are those risks which the Directors consider to be material as at the date of this document, but are not the only risks relating to the New Ordinary Shares and/or the New ZDP Shares and the Company. There may be additional risks that the Directors do not currently consider to be material or of which the Directors are not aware, which may affect the Company s financial condition, performance, prospects, results and/or the price of New Ordinary Shares and New ZDP Shares. An investment in the New Ordinary Shares and/or the New ZDP Shares is suitable only for investors who are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear losses (which may equal the whole amount invested) that may result from such an investment. An investment in the New Ordinary Shares and/or the New ZDP Shares should constitute part of a diversified investment portfolio. Typical investors are expected to be professionally advised private investors and professional investors. If investors are in any doubt as to the consequences of their acquiring, holding or disposing of New Ordinary Shares and/or the New ZDP Shares, or whether an investment in New Ordinary Shares and/or the New ZDP Shares is suitable for them in the light of information in, or incorporated by reference into, this document or their personal circumstances including the financial resources available to them, they should consult their stockbroker or other independent financial adviser authorised under the FSMA or, in the case of investors outside the United Kingdom, another appropriately authorised independent financial adviser before making their own decision to invest in the New Ordinary Shares and/or New ZDP Shares. 1 Risks relating to the Company The effects of both normal market fluctuations and global economic conditions may impact the business, operating results or financial condition of the Company These are factors which are outside the Company s control and which may affect the volatility of underlying asset values and the liquidity and the value of the Portfolios. Changes in economic conditions (including, for example, interest rates and rates of inflation), industry conditions, competition, political and diplomatic events and trends and tax laws, and other factors can substantially and either adversely or favourably affect the Company s prospects and the value of the Portfolios. Global financial markets have recently experienced considerable declines and volatility in valuations, an acute contraction in the availability of credit and the failure of a number of leading financial institutions. As a result, certain government bodies and central banks worldwide have undertaken intervention programs, the effects of which remain uncertain. These macroeconomic developments could negatively affect the returns achievable by the Company and its Portfolios which could negatively impact on the returns available to shareholders, including the Final Capital Entitlement. Liquidity risk Investing in smaller companies, including AIM companies, can carry greater risks than those usually associated with larger capitalised companies with the result that certain of the investments in the Portfolios may be illiquid. The Company may not be able to immediately dispose of such investments if it determines that such a sale would be in its best interests. Reliance on the Investment Manager, Investment Advisers and their key personnel The Company s future performance depends on the success of its strategy, the skill and judgement of the Investment Manager and of the Investment Advisers. There can be no guarantee that any individual employee of the Investment Manager or of an Investment Adviser referred to in this document will remain in their employment. The departure of a key employee may have an adverse effect on the performance of the Company. 15

16 c108323pu030 Proof 3: _12:43 B/L Revision: Conflicts of interest The Investment Manager and Investment Advisers are not required to devote all their resources to the Company. To the extent that the Investment Manager and the Investment Advisers devote resources to their responsibilities to other business interests, their ability to devote resources and attention to the Company s affairs will be limited. This could adversely affect the Company s ability to achieve its investment objective, which could have a material adverse effect on the Company s profitability, Net Asset Value and Share price. The Investment Manager and Investment Advisers are involved in other financial, investment or professional activities which may on occasion give rise to conflicts of interest with the Company. In particular, the Investment Manager and Investment Advisers manage funds other than the Company and may provide investment management, investment advisory or other services in relation to these funds or future funds which may have similar investment policies to that of the Company. The Investment Manager and Investment Advisers may carry on investment activities for their own accounts and for other accounts in which the Company has no interest. The Investment Manager and Investment Advisers also provide management services to other clients, including other collective investment vehicles. The Investment Manager and Investment Advisers may give advice and recommend securities to other managed accounts or investment funds which may differ from advice given to, or investments recommended or bought for, the Company, even though their investment policies may be the same or similar. Past performance The past performance of the Investment Manager and the Investment Advisers of the Company or of other assets or funds are not guides to the future performance of the Company. There can be no guarantee that the investment objective and policy of the Company will be met or that any stated current or future targets or returns will be achieved. Derivatives The Company may use derivatives to hedge exposure to currency risk and interest rate risk. No assurance can be given that any hedging strategies which may be used by the Company will be successful under all or any market conditions. While the Company may enter into hedging transactions to reduce its exposure to currency fluctuations or interest rate changes, unanticipated market changes may result in poorer investment performance overall than if such transactions had not been executed. The Company is also subject to the risk that counterparties to any hedging or other derivative transactions will be unable or unwilling to perform their obligations. Any default by any such counterparty could have an adverse effect on the Company s financial condition. Portfolio risk To the extent that the Company may invest in securities listed on recognised stock exchanges such investments will be subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of securities, and there can be no assurance that appreciation in the value of those investments will occur. Investment in certain asset classes in which the Company may invest may involve a greater degree of risk than that usually associated with investment in equity securities markets. Investment in higher yielding investment company shares may provide greater total returns than investment in interest-bearing securities carrying a higher credit rating, but it also entails greater risk, including a higher risk of default. Any such default may have a material adverse effect on the returns to the Company from such investments. In addition, market prices of higher yielding securities generally fluctuate more than market prices of higher-rated, interest-bearing securities. As a result of the underlying gearing in some investment company shares, any increase or decrease in the value of such shares might magnify movements in their net asset values and consequently affect the value of the Income Portfolio accordingly. There is often limited market liquidity in higher yielding securities, which means that it may not be possible to realise such investments quickly and there is no guarantee that such investments can be realised at their stated bid prices. The Company may not be able to immediately dispose of such investments if it determines that such a sale would be in its best interests. Certain of the securities held in the Portfolios may be denominated in a foreign currency and the returns to the Company may be affected by fluctuations in exchange rates. There can be no 16

17 c108323pu030 Proof 3: _12:43 B/L Revision: guarantee that any hedging strategies employed by the Investment Manager or the Investment Advisers will be successful. The Income Portfolio will primarily contain fixed interest securities. Bond prices and interest rates are inversely correlated. Thus, when interest rates increase, the price of a bond with a fixed coupon will decline. Alternatively, when interest rates decline, the price of a bond with a fixed coupon will increase. Any rise in interest rates may affect the returns on such investments to the Company. 2 Risks relating to the Ordinary Shares Gearing The Company s capital structure is such that the underlying value of assets attributable to the Ordinary Shares will be geared by the rising capital entitlements of the ZDP Shares. The Ordinary Shares are therefore geared by the ZDP Shares and should be regarded as carrying above average risk since a positive Net Asset Value for the Ordinary Shareholders will be dependent upon the Company s assets being sufficient to meet those prior entitlements of the holders of ZDP Shares. Whilst the use of gearing should enhance the total return on the Ordinary Shares where the return on the Company s underlying assets is rising and exceeds the cost of gearing, it will have the opposite effect where the underlying return is falling, further reducing the total return on the Ordinary Shares. Ranking on a return of capital The Ordinary Shares rank for repayment of capital after the ZDP Shares and any creditors of the Company from time to time. On a return of assets, including the winding-up of the Company, Ordinary Shareholders will only receive payment if there are sufficient assets after the payment of creditors and ZDP Shareholders. Entitlement to income The Ordinary Shareholders will be entitled to all of the amounts resolved by the Directors to be distributed as dividend in accordance with the Law. Dividend growth from the Ordinary Shares will depend on growth in the Company s returns from its portfolio of investments. The Net Asset Value of the Ordinary Shares will be determined by the performance of the Company s portfolio as geared by the capital entitlement of the ZDP Shares. Ordinary Shareholders will benefit from any out-performance and will suffer any under-performance in respect of the Company s portfolio. Any change in the tax treatment of dividends paid or income received by the Company may reduce the dividends paid to the holders of the Ordinary Shares. A reduction of returns from the Company s investments would adversely affect the yield on the Ordinary Shares. Such a reduction could arise, for example, from lower rates of dividend paid on investments. The Law provides that a distribution may not be made by a company unless the Directors are satisfied on reasonable grounds (and certify) that the company will, immediately after making such distribution, satisfy the solvency test as defined under the Law. For the purposes of the Law, a company satisfies the solvency test if: (i) the company is able to pay its debts as they become due; (ii) the value of the company s assets is greater than the value of its liabilities; and (iii) in the case of a supervised company, the company satisfies any other requirements as to solvency imposed in relation to it under section 527(1)(c) of the Law. Accordingly, any entitlement to income is dependent on the Company meeting the solvency test. There may not be a liquid secondary market for the Ordinary Shares, the price of which may fluctuate There may not be a liquid secondary market for the Ordinary Shares. In addition, the value of the Ordinary Shares can go down as well as up. The market price and the realisable value of the Ordinary Shares, as well as being affected by the underlying value of the Company s assets, will be affected by interest rates, supply and demand for the Ordinary Shares, market conditions and general investor sentiment. As such, the market value of the Ordinary Shares will fluctuate and may vary considerably. In addition, the published market price of the Ordinary Shares will be, typically, their middle market price. Due to the potential difference between the middle market price of the Ordinary Shares and the price at which the Ordinary Shares can be sold, there is no guarantee that the realisable value of the Ordinary Shares will be the same as the published market price. 17

18 c108323pu030 Proof 3: _12:43 B/L Revision: Ordinary Shareholders do not have a right for their Ordinary Shares to be redeemed and those Ordinary Shareholders wishing to realise their investment will be required to dispose of their Ordinary Shares on the stock market. There is less market liquidity in the shares of companies such as the Company than in shares issued by larger companies traded on the London Stock Exchange. Notwithstanding that application will be made for the New Ordinary Shares to be admitted to trading on the London Stock Exchange s main market for listed securities, there can be no guarantee that a liquid market will exist at any time for the Ordinary Shares. Listing should not be taken as implying that there will be a liquid market for the Ordinary Shares. There is no guarantee that an active market will be sustained for the Ordinary Shares. If an active trading market is not maintained, the liquidity and trading price of the Ordinary Shares could be adversely affected. Even if an active trading market is maintained, the market price for the Ordinary Shares may fall below the applicable Issue Price and Ordinary Shareholders may not realise their initial investment. 3 Risks relating to the ZDP Shares Interest rate changes may affect the market price of ZDP Shares The market values of ZDP Shares will be affected by changes in general interest rates, with upward movements in interest rates likely to lead to reductions in the market value of ZDP Shares. Entitlements of the ZDP Shares Although the holders of ZDP Shares have a prior entitlement to the other assets of the Company (after payment of its liabilities) on a winding-up, if the gross assets of the Company fall at a rate which erodes the Cover to a ratio of less than 1 over the planned life of the ZDP Shares, this would result in a lower payment than the Fixed Capital Entitlement on the ZDP Repayment Date. ZDP Shares are not a protected or guaranteed investment. Should the ZDP Shares be issued and the Company be wound up prior to the ZDP Repayment Date, holders of ZDP Shares would only receive their accrued entitlement to the date of the winding-up. This would be less than the Final Capital Entitlement and would be subject to the Company having sufficient net assets. The standard listing of the ZDP Shares affords ZDP Shareholders a lower level of regulatory protection than a premium listing Application will be made for the New ZDP Shares to be admitted to a standard listing on the Official List. A standard listing affords ZDP Shareholders a lower level of regulatory protection than that afforded to investors in companies with premium listings on the Official List, which are subject to additional obligations under the Listing Rules. However, because the Company has Ordinary Shares with a premium listing, it is subject to the Listing Principles (as set out in Chapter 7 of the Listing Rules) and is required to comply with them. As a consequence of the standard listing of the New ZDP Shares, while additional on-going requirements and protections applicable to a premium listing under the Listing Rules apply to the Company and its Ordinary Shares, they will not apply to ZDP Shareholders who will therefore not receive the full protections of the Listing Rules associated with a premium listing on the Official List. There may not be a liquid secondary market for the ZDP Shares, the price of which may fluctuate There may not be a liquid secondary market for the ZDP Shares, and an investment of this type should be regarded as long-term in nature and may not be suitable as a short-term investment. In addition, the value of the ZDP Shares can go down as well as up. The market price and the realisable value of the ZDP Shares, as well as being affected by the underlying value of the Company s assets, will be affected by interest rates, supply and demand for the ZDP Shares, market conditions and general investor sentiment as to the ability of the Company to pay the Final Capital Entitlement of the ZDP Shares. As such, the market value and the realisable value (prior to redemption) of the ZDP Shares will fluctuate and may vary considerably. In addition, the published market price of the ZDP Shares will be, typically, their middle market price. Due to the potential difference between the middle market price of the ZDP Shares and the price at which the ZDP Shares can be sold, there is no guarantee that the realisable value of the ZDP Shares will be the same as the published market price. 18

19 c108323pu030 Proof 3: _12:43 B/L Revision: ZDP Shareholders only have the right to receive the Final Capital Entitlement on the ZDP Repayment Date and not before. ZDP Shareholders wishing to realise their investment prior to the ZDP Repayment Date will be required to dispose of their ZDP Shares on the stock market. There is less market liquidity in the shares of companies such as the Company than in shares issued by larger companies traded on the London Stock Exchange. There can be no guarantee that a liquid market will exist for the ZDP Shares. Notwithstanding that application will be made for the New ZDP Shares to be admitted to trading on the London Stock Exchange s main market for listed securities, there can be no guarantee that a liquid market will exist at any time for the ZDP Shares. Accordingly, ZDP Shareholders may be unable to realise ZDP Shares prior to the ZDP Repayment Date. Listing should not be taken as implying that there will be a liquid market for the ZDP Shares. There is no guarantee that an active market will be sustained for the ZDP Shares. If an active trading market is not maintained, the liquidity and trading price of the ZDP Shares could be adversely affected. Even if an active trading market is maintained, the market price for the ZDP Shares may fall below the applicable Issue Price and ZDP Shareholders may not realise their initial investment. Holders of ZDP Shares may not receive the Final Capital Entitlement The ZDP Shares rank prior to the Ordinary Shares in respect of the Final Capital Entitlement. Although that is the case, on a return of assets, including the winding-up of the Company, ZDP Shareholders would only receive payment if there are sufficient assets of the Company and having regard to all other unsecured liabilities of the Company. ZDP Shares are not a secured, protected or guaranteed investment. A redemption is a distribution for the purposes of the Law and the Law provides that a distribution may not be made by a company unless the Directors are satisfied on reasonable grounds (and certify) that the company will, immediately after making such distribution, satisfy the solvency test as defined under the Law. For the purposes of the Law, a company satisfies the solvency test if: (i) the company is able to pay its debts as they become due; (ii) the value of the company s assets is greater than the value of its liabilities; and (iii) in the case of a supervised company, the company satisfies any other requirements as to solvency imposed in relation to it under section 527(1)(c) of the Law. Accordingly, the redemption of the ZDP Shares on the ZDP Repayment Date is dependent on the Company meeting the solvency test. As a result of these risks, the Redemption Yield of a ZDP Share is not and should not be taken as a forecast of profits and there can be no assurance that the Final Capital Entitlement of the ZDP Shares will be repaid in full on the ZDP Repayment Date. Future share issues could dilute the interests of the ZDP Shareholders and lower the price of the ZDP Shares The Company may issue additional ZDP Shares in future, which may dilute the existing investors interests in the ZDP Shares. While the Company is only permitted to issue New ZDP Shares in circumstances where: (i) the Cover Test is met; or (ii) where Cover is maintained or is otherwise increased, such additional issues of New ZDP Shares may dilute existing holders voting interests. Structural conflicts of interest The different rights and expectations of the Ordinary Shareholders and the ZDP Shareholders may give rise to conflicts of interest between them. Holders of ZDP Shares can be expected to have little or no interest in the revenue produced by the Company s Portfolios, save to the extent that the Company s operating costs exceed that revenue. ZDP Shareholders can be expected to want the capital value of the Portfolios to be sufficient to repay the Final Capital Entitlement of the ZDP Shares on the ZDP Repayment Date, but can be expected to have little or no interest in any growth in capital in excess of that amount. Conversely, holders of Ordinary Shares can be expected to be interested in both the revenue that the Portfolios produce (and hence the level of dividends which will be capable of being paid on Ordinary Shares) and increases in the capital value of the Portfolios in the period to the ZDP Repayment Date, in excess of the Final Capital Entitlement of the ZDP Shares. In certain circumstances, such as a major fall in the capital value of the Portfolios such that the Final Capital Entitlement of the ZDP Shares is significantly uncovered but where the Company s Portfolios are still generating revenue, the interests of ZDP Shareholders and the Ordinary 19

20 c108323pu030 Proof 3: _12:43 B/L Revision: Shareholders may conflict. The ZDP Shareholders may wish the Portfolios to be re-balanced or more revenue to be retained in order to meet their Final Capital Entitlement while the holders of Ordinary Shares may recognise that they then have little prospect of a sizeable capital return and so may be more concerned with maximising dividends in the period to the ZDP Repayment Date. In such circumstances, the Directors may find it impossible to meet fully both sets of expectations and so will need to act in a manner which they consider to be fair and equitable to both Ordinary Shareholders and ZDP Shareholders but having regard to the entitlements of each class of Shares. 4 Risks relating to taxation The Finance (No.2) Bill 2013 contains new rules (the New Rules ) intended to make returns which are economically equivalent to interest subject to income tax as income. The New Rules have not yet been enacted, nor has HMRC published any draft guidance. Shareholders should note that the position could change, possibly quite significantly, before the New Rules are finally enacted. More information is given on the New Rules in Part 10. The legislation and the policy behind the New Rules are subject to further consideration by HMRC and lobbying from taxpayer representatives. Thus, significant differences could emerge from the present understanding of the position as a result of changes to the draft legislation or the publication of HMRC guidance. HMRC consider that the New Rules are in principle capable of applying to zero dividend preference shares. However there are to be important exceptions which, as things stand at present, the Directors believe may apply to the New ZDP Shares. If the New Rules did apply to the New ZDP Shares, it is likely that the return on the New ZDP Shares would be subject to tax as income. It is also unclear how the New Rules would work if the Existing ZDP Shares are excepted from the New Rules (as expected under the draft legislation) but the New ZDP Shares, which are to be fungible with the Existing ZDP Shares, are not. Any change in the Company s tax status, or in taxation legislation or practice in the United Kingdom or elsewhere, could affect the value of the investments in the Portfolios and the Company s ability to achieve its investment objective and could also affect the tax treatment of the ZDP Shares and the tax treatment of the Final Capital Entitlement. Statements in this document concerning the taxation of shareholders are based upon current UK and Guernsey tax law and published practice, which law and practice are in principle subject to change (potentially with retrospective effect) that could adversely affect the ability of the Company to meet its investment objective. Statements in this document in particular take into account legislation introduced by the Finance Act 2009 which provides for a new definition of an offshore fund for the purposes of the United Kingdom offshore fund rules. Should the Company or any class of Shares be regarded as subject to the UK offshore fund rules, this may have adverse tax consequences for certain UK resident shareholders on the disposal of Shares. 5 Regulatory risks The EU Alternative Investment Fund Managers Directive (the Directive ) is due to be implemented by July Investment companies such as the Company will constitute alternative investment funds for the purposes of the Directive, which will regulate, inter alia, the management of the Company and the marketing of the Company s securities. Requirements of the Directive may include increased disclosure obligations, ensuring that the investment company has an appropriately authorised institution acting as its depositary, the requirement to have independent portfolio valuations and ensuring that any delegate of the Investment Manager is agreed to by the FCA. The precise impact of the Directive is, as yet, unknown. However, some of the changes required by the Directive may have significant consequences for the Company (and all similar investment companies) and might materially increase compliance and regulatory costs. 6 General The Company s Portfolios are constructed without reference to any stock market index. It is therefore likely that there will be periods when its performance will be quite unlike that of any index and there can be no assurance that such divergence will be wholly or even primarily to the Company s advantage. The Ordinary Shares and the ZDP Shares are an unsuitable investment for those who seek investments that are in some way correlated to a stock market index. 20

21 c108323pu030 Proof 3: _12:43 B/L Revision: The past performance of the Company and of investments which are referred to in this document are for information or illustrative purposes only and should not be interpreted as an indication, or as a guarantee, of future performance. 21

22 c108323pu030 Proof 3: _12:43 B/L Revision: FORWARD LOOKING STATEMENTS Some of the statements under the sections entitled Summary, Risk Factors, Part 1: Information on the Issues and elsewhere in this document include forward-looking statements which reflect the Company s or, as appropriate, the Directors or the Investment Manager s or Investment Advisers current views with respect to financial performance, business strategy, plans and objectives of management for future operations. These statements include forward-looking statements both with respect to the Company and the sectors and industries in which it operates. Statements which include the words expects, intends, plans, believes, projects, anticipates, will, targets, aims, may, would, could, continue and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Company s actual results to differ materially from those indicated in these statements. These factors include but are not limited to those described in the part of this document entitled Risk Factors, which should be read in conjunction with the other cautionary statements that are included in this document. Any forwardlooking statements in this document reflect the Company s current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company s operations, results of operations and growth strategy. These forward-looking statements speak only as of the date of this document. Subject to any obligations under the Prospectus Rules, the Listing Rules, the Disclosure and Transparency Rules and the Authorised Closed-ended Investment Schemes Rules 2008, the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or individuals acting on behalf of the Company are expressly qualified in their entirety by this paragraph. Prospective investors should specifically consider the factors identified in this document which could cause actual results to differ before making an investment decision. 22

23 c108323pu030 Proof 3: _12:43 B/L Revision: CONSEQUENCES OF A STANDARD LISTING OF THE ZDP SHARES Application will be made for the New ZDP Shares to be admitted to a standard listing on the Official List pursuant to Chapter 14 of the Listing Rules, which sets out the requirements for standard listings. However, because the Company has Ordinary Shares with a premium listing, it is subject to the Listing Principles (as set out in Chapter 7 of the Listing Rules) and is required to comply with them. As a consequence of the standard listing of the New ZDP Shares, while additional on-going requirements and protections applicable to a premium listing under the Listing Rules apply to the Company and its Ordinary Shares, they will not apply to ZDP Shareholders who will therefore not receive the full protections of the Listing Rules associated with a premium listing on the Official List. Listing Rule 14.3 sets out the continuing obligations applicable to ZDP Shares and requires that all the Company s listed securities must be admitted to trading on a regulated market at all times. The Company must have a minimum number of shares of any listed class (25 per cent.) in public hands at all times in the relevant jurisdictions and must notify the FCA as soon as possible if these holdings fall below the stated level. There are a number of other continuing obligations set out in Chapter 14 of the Listing Rules that will be applicable to ZDP Shares. These include requirements as to: (a) the forwarding of circulars and other documentation to the FCA for publication through the national storage mechanism, and related notification to an RIS; (b) the form and content of temporary and definitive documents of title; (c) the appointment of a registrar; (d) the RIS notification obligation in relation to a range of debt and equity capital issues; and (e) compliance with the Disclosure and Transparency Rules. On 2 October 2012, the FSA (now the FCA) published consultation paper CP 12/2 which sets out proposals for certain amendments to the continuing obligations applicable to securities with a standard listing. This paper included proposals to inter alia remove the requirement for a minimum absolute percentage free float within the standard segment, provided that sufficient liquidity is present, and to expand certain of the Listing Principles to apply to standard listings. The deadline for responding to the consultation was 2 January 2013 and the FCA has indicated that it intends to publish feedback on the responses to the consultation in the spring of ZDP Shareholders should therefore be aware that the regulatory framework in relation to a standard listing is subject to change. 23

24 c108323pu030 Proof 3: _12:43 B/L Revision: ISSUE STATISTICS Ordinary Shares Maximum number of New Ordinary Shares being issued pursuant to the Issues Ordinary Share ISIN number 14 million GB Ordinary Share SEDOL ZDP Shares Maximum number of New ZDP Shares being issued pursuant to the Issues ZDP Share ISIN number ZDP Share SEDOL 19 million GG00B4W1FT21 B4W1FT2 24

25 c108323pu030 Proof 3: _12:43 B/L Revision: INITIAL PLACING AND OFFER STATISTICS The following illustrative financial statistics are based on, and should be read in conjunction with, the Assumptions set out in Part 8 of this document. Prospective investors should note that these are assumptions only which may or may not be fulfilled in practice and actual outcomes can be expected to differ from these illustrations. The illustrations are not to be regarded as forecasts of profit or growth in the value of the Company s assets or guarantees of future performance and involve certain risks and uncertainties that are hard to predict. Investors should therefore not rely on the illustrations. In particular, the Gross Redemption Yield and Cover indicated for the New ZDP Shares is based on the Assumptions. The attention of prospective investors is also drawn to the risk factors set out on pages 15 to 21 of this document. New Ordinary Shares Initial Placing and Offer Price per New Ordinary Share New ZDP Shares Initial Placing and Offer Price per New ZDP Share Final Capital Entitlement per New ZDP Share Gross Redemption Yield at the Initial Placing and Offer Price NAV per Ordinary Share on the Calculation Date pence 138 pence 5.0 per cent. Cover for the New ZDP Shares at Admission based on the Initial Placing and Offer Price 2.2 times 25

26 c108323pu030 Proof 3: _12:43 B/L Revision: EXPECTED TIMETABLE OF PRINCIPAL EVENTS Each of the times and dates is subject to change. References to a time of day are to London time. Any changes to the timetable will be notified by publication of a notice through an RIS. Offer for Subscription opens Latest time and date for receipt of Application Forms under the Offer for Subscription Latest time and date for receipt of commitments under the Initial Placing Results of Initial Placing and Offer announced Admission and dealings in the Initial Placing and Offer Shares commence Expected date for crediting of Initial Placing and Offer Shares to CREST accounts in uncertificated form Expected date for despatch of certificates for the Initial Placing and Offer Shares May a.m. on 23 May a.m. on 23 May 23 May 8.00 a.m. on 29 May 8.00 a.m. on 29 May In the week commencing 3 June Placing Programme opens Placing Programme closes 30 May May 26

27 c108323pu030 Proof 3: _12:43 B/L Revision: DIRECTORS AND ADVISERS Board of Directors Administrator, Secretary and Registered Office Investment Manager Investment Adviser Smaller Companies Portfolio Investment Adviser Income Portfolio Corporate Broker, Financial Adviser and Sponsor to the Issues English Legal Advisers to the Company Guernsey Legal Advisers to the Company English Legal Advisers to the Issues Reporting Accountants Auditors Custodian Receiving Agent and Registrar Helen Green Non-executive Chairman Nigel Ward Non-executive Director David Warr Non-executive Director Anson Fund Managers Limited Anson Place Mill Court La Charroterie St Peter Port Guernsey GY1 1EJ Tel: +44 (0) Premier Asset Management (Guernsey) Limited Anson Place Mill Court La Charroterie St Peter Port Guernsey GY1 1EJ Unicorn Asset Management Limited Preacher s Court The Charterhouse Charterhouse Square London EC1M 6AU Premier Fund Managers Limited Eastgate Court High Street Guildford GU1 3DE Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT Stephenson Harwood LLP 1 Finsbury Circus London EC2M 7SH Mourant Ozannes PO Box Le Marchant Street St Peter Port Guernsey GY1 4HP Norton Rose LLP 3 More London Riverside London SE1 2AQ Crowe Clarke Whitehill LLP St Bride s House 10 Salisbury Square London EC4Y 8EH KPMG Channel Islands Limited PO Box 20, 20 New Street St Peter Port Guernsey GY1 4AN BNP Paribas Trust Company (Guernsey) Limited BNP Paribas House St Julian s Avenue St Peter Port Guernsey GY1 3WE Anson Registrars Limited Anson Place Mill Court La Charroterie St Peter Port Guernsey GY1 1EJ 27

28 c108323pu030 Proof 3: _12:43 B/L Revision: PART 1: INFORMATION ON THE ISSUES 1 Background and reasons for the Issues The Company is an authorised closed-ended investment company incorporated in Guernsey with an objective of providing shareholders with a high income and also the opportunity for capital growth. The Company currently has two classes of Shares in issue: Ordinary Shares and ZDP Shares. The Ordinary Shares have been admitted to listing by the UK Listing Authority and traded on the London Stock Exchange since February In 2011, the Company implemented a placing of 12,000,000 ZDP Shares in order to refinance its existing bank facilities and those shares have been admitted to listing by the UK Listing Authority and traded on the London Stock Exchange since December The Directors believe that there is likely to be demand for the New Ordinary Shares and the New ZDP Shares, and that such demand may not be capable of being satisfied in the secondary market other than at significant premium to NAV. The Company is therefore proposing the Initial Placing and Offer of New Ordinary Shares and New ZDP Shares, and the Placing Programme which is designed to enable the Company to satisfy subsequent demand for New Ordinary Shares and New ZDP Shares. At an extraordinary general meeting held on 24 April 2013, Ordinary Shareholders approved the issue of up to 14 million New Ordinary Shares on a non-pre-emptive basis and up to 19 million New ZDP Shares for the purpose of the Issues. The authority to issue any New ZDP Shares is limited to circumstances where either: (i) the Cover Test is met; or (ii) Cover is maintained or otherwise increased. At a class meeting held on 24 April 2013, ZDP Shareholders consented to the issue of up to 19 million New ZDP Shares in the circumstances described above. 2 The New Ordinary Shares General The New Ordinary Shares to be issued pursuant to the Issues will rank pari passu with the Existing Ordinary Shares in all respects, save for any dividends declared, made or paid on the Existing Ordinary Shares by reference to a record date prior to the issue of the New Ordinary Shares. Pricing The price at which New Ordinary Shares will be issued pursuant to the Initial Placing and Offer will be the NAV per Ordinary Share on the Calculation Date. New Ordinary Shares will be issued under the Placing Programme at prices determined by the Board. Further details are set out in Parts 2 and 3 of this document. Income The Ordinary Shares carry the right to receive all dividends declared by the Company. In respect of the year ended 31 December 2012, Ordinary Shareholders received a dividend of 12 pence per Ordinary Share, paid quarterly. The Directors anticipate that the same (or close to the same) level of dividend will be paid in respect of the year ended 31 December 2013, with some scope for dividend growth in the future although there can be no guarantee as to the level of dividends paid. The New Ordinary Shares carry the right to receive all dividends declared by the Company. For the avoidance of doubt the New Ordinary Shares will not be entitled to receive any dividends declared, made or paid on the Ordinary Shares by reference to a record date prior to the allotment of the New Ordinary Shares. The Directors have declared a second interim dividend for the year ending 31 December 2013 of 2 pence per Ordinary Share, to which the New Ordinary Shares will not be entitled as the record date of 17 May 2013 falls before the expected issue date of the New Ordinary Shares. The Directors anticipate declaring a third interim dividend of 1 pence, with a record date in June 2013, and thereafter to resume quarterly payments of dividends. The payment of both the second and third interim dividends is intended to be made in June

29 c108323pu030 Proof 3: _12:43 B/L Revision: Gearing The Company s capital structure is such that the underlying value of assets attributable to the Ordinary Shares is geared relative to the rising capital entitlements of the ZDP Shares. The Ordinary Shares are therefore geared by the ZDP Shares. Capital On a winding-up, the Ordinary Shareholders shall first be entitled to receive any undistributed income standing to the credit of the Company s accounting revenue reserves. The Ordinary Shareholders shall also be entitled to the net assets of the Company, after all liabilities of the Company have been settled and the entitlements of the ZDP Shares have been met. Voting Ordinary Shareholders are entitled to vote at general meetings of the Company. Each Ordinary Shareholder has one vote on a show of hands and, on a poll, one vote for every Ordinary Share held. Duration The Company has been established with an unlimited life (although under the Articles, the Directors are required to propose a special resolution every five years that the Company should cease to continue as presently constituted (a Discontinuation Resolution )). The Company s second Discontinuation Resolution was defeated in August The Company is required, pursuant to the Articles, to propose a Discontinuation Resolution at the annual general meeting in Full details of the rights attaching to the Ordinary Shares are set out in paragraph of Part 9 of this document. 3 Ordinary Share investment highlights It is expected that investors in the New Ordinary Shares will typically be professional investors and professionally advised private investors. The Directors believe an investment in the New Ordinary Shares is potentially attractive to such investors because: * the Company s investment objective is to provide Ordinary Shareholders with a high income and also opportunity for capital growth and its performance has consistently been strong in both absolute and relative terms. This can be illustrated in outline by the following table of returns and is discussed in further detail in Part 4: Cumulative total return % 1 year 3 years 5 years 10 years NAV per Ordinary Share Ordinary Share price Numis Smaller Companies Index (excluding Investment Companies) Source: Datastream to 30 April 2013 * the Company s dividend yield currently represents a premium of per cent. relative to the FTSE All-Share Index. The dividends paid by the Company in the year ended 31 December 2012 were 12 pence per Ordinary Share and the Directors currently anticipate the same (or close to the same) level of dividends being paid in respect of the year ended 31 December The Directors believe that there is potential for the Ordinary Shares to benefit from dividend growth in the future, although there can be no guarantee that there will be any increase in dividends paid by the Company; * the Company principally invests in UK small and mid-cap companies, using an approach which aims to produce sustainable long term returns through the consistent application of clearly defined investment criteria. The Directors believe that this policy provides potential investors with a more diversified source of income than that typically available from UK equity income funds which tend to focus on investments in constituents of the FTSE 350 Index, which has become increasingly concentrated. 29

30 c108323pu030 Proof 3: _12:43 B/L Revision: Private investors considering an investment in the New Ordinary Shares through the Offer for Subscription should consult an appropriately authorised financial adviser regarding the potential attractions set out above. 4 The New ZDP Shares General The New ZDP Shares to be issued pursuant to the Issues will rank pari passu with the Existing ZDP Shares in all respects. Pricing The price at which the New ZDP Shares will be issued pursuant to the Initial Placing and Offer will be pence per New ZDP Share. New ZDP Shares will be issued under the Placing Programme at prices determined by the Board. Further details are set out in Part 3 of this document. Repayment Date and Final Capital Entitlement The ZDP Shares have a repayment date of 31 January 2017 and a Final Capital Entitlement of 138 pence per ZDP Share on the ZDP Repayment Date. The Final Capital Entitlement will rank in priority to the capital entitlements of the Ordinary Shares but there can be no assurance that the Final Capital Entitlement of the ZDP Shares will be repaid in full on the ZDP Repayment Date as it is not a guaranteed or secured repayment amount. Income The ZDP Shares carry no rights to receive dividends out of the revenue or any other profits of the Company. Voting The ZDP Shares do not carry the right to vote at general meetings of the Company, although they carry the right to vote as a class on certain proposals which would be likely to materially affect their position. Duration The Company has been established with an unlimited life (although under the Articles a Discontinuation Resolution is to be proposed every five years). The Company s second Discontinuation Resolution was defeated in August The Company is required, pursuant to the Articles, to propose a similar Discontinuation Resolution at the annual general meeting in If it is passed, proposals will be formulated having regard to the need to redeem the ZDP Shares on 31 January Further information on the rights attaching to the ZDP Shares is set out in paragraph 4.22 of Part 9 of this document. 5 ZDP Shares investment highlights It is expected that investors in the New ZDP Shares will typically be professional investors and professionally advised private investors. The Directors believe an investment in the New ZDP Shares is potentially attractive to such investors because: * the New ZDP Shares offer the potential, subject to the Company s performance, for a predetermined payment of 138 pence per ZDP Share on 31 January Based on the Assumptions, a repayment of the Final Capital Entitlement would generate a Gross Redemption Yield of 5.0 per cent. based on the Initial Placing and Offer Price per New ZDP Share of pence; * asset cover for the Final Capital Entitlement is derived from a broad spread of investments across the Income Portfolio and the Smaller Companies Portfolio; and * save with the prior sanction of ZDP Shareholders, the Company will not take on any bank borrowings (save for short term borrowings in the ordinary course of business such as to settle share trades or borrowings to finance the redemption of the ZDP Shares) until the ZDP Repayment Date. 30

31 c108323pu030 Proof 3: _12:43 B/L Revision: Private investors considering an investment in the New ZDP Shares through the Offer for Subscription should consult an appropriately authorised financial adviser regarding the potential attractions set out above. 31

32 c108323pu030 Proof 3: _12:43 B/L Revision: PART 2: THE INITIAL PLACING AND OFFER FOR SUBSCRIPTION 1 Introduction Under the Initial Placing and Offer, the Company is proposing to issue up to 7 million New Ordinary Shares at the Initial Placing and Offer Price per New Ordinary Share (being the NAV per Ordinary Share on the Calculation Date, which is expected to be announced via a RIS on 23 May 2013) and up to 9.6 million New ZDP Shares at an Initial Placing and Offer Price per New ZDP Share (being pence per New ZDP Share) to raise Gross Proceeds of up to approximately 30 million. The Directors have reserved the right, in consultation with Numis, to increase the number of New Shares offered pursuant to the Initial Placing and Offer to up to the maximum amount authorised pursuant to the Issues, being up to 14 million New Ordinary Shares and up to 19 million New ZDP Shares. Any such increase will be announced via an RIS. The costs of the Initial Placing and Offer are dependent on subscriptions received but, by way of illustration, will be between 1.0 per cent. of the Gross Proceeds should the Initial Placing and Offer raise Gross Proceeds of 5 million and 1.2 per cent. of Gross Proceeds should the Initial Placing and Offer raise 30 million. It is expected that these costs will be covered by the premium generated on issuing the New ZDP Shares at the Initial Placing and Offer Price per New ZDP Share. The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares and the New ZDP Shares will rank pari passu in all respects with the Existing ZDP Shares, save for any dividends declared, made or paid on the Existing Ordinary Shares by reference to a record date prior to the issue of the New Ordinary Shares. The Initial Placing and Offer is conditional, inter alia, on: (i) the Placing and Offer Agreement becoming wholly unconditional (save as to Admission) and not having been terminated in accordance with its terms prior to Admission; and (ii) Admission of the Initial Placing and Offer Shares occurring by 8.00 a.m. on 29 May 2013 (or such later date as the Company and Numis may agree in writing, being not later than 8.00 a.m. on 30 June 2013). The Initial Placing and Offer is not being underwritten. 2 Details of the Initial Placing Numis has agreed under the Placing and Offer Agreement to use its reasonable endeavours to procure Placees for New Ordinary Shares and/or New ZDP Shares at the applicable Initial Placing Price. Details of the Placing and Offer Agreement are set out in paragraph 14.1 of Part 9 of this document. The total number of New Ordinary Shares and New ZDP Shares issued under the Initial Placing will be determined by the Company and Numis, after taking into account demand for the New Ordinary Shares and the New ZDP Shares and prevailing market conditions. The final result of the Initial Placing will be announced via an RIS. The Initial Placing will close at a.m. on 23 May 2013 (or such later date, not being later than 30 May 2013, as the Company and Numis may agree). If the Initial Placing is extended, the revised timetable will be notified via an RIS. The procedure for, and the terms and conditions of, application under the Initial Placing are set out on pages 85 to 91 of this document. Commitments under the Initial Placing, once made, may not be withdrawn without the consent of the Directors. 3 Details of the Offer for Subscription The Directors are proposing to offer New Ordinary Shares and New ZDP Shares under the Offer for Subscription. The Offer for Subscription is being made in the UK only. The public generally (unless they are located or resident outside the UK) may apply for New Ordinary Shares and New ZDP Shares through the Offer for Subscription. Applicants under the Offer for Subscription must specify a fixed sum in Sterling, being the aggregate subscription price for the New Ordinary Shares and the New ZDP Shares for which they 32

33 c108323pu030 Proof 3: _12:43 B/L Revision: wish to apply at the Initial Placing and Offer Price. The aggregate subscription price is payable in full on application. Individual applications must be for New Ordinary Shares and/or New Shares with a minimum aggregate value at the Initial Placing and Offer Price of 1,000 and applications in excess of that amount should be made in multiples of 100. The procedure for, and the terms and conditions of, application under the Offer for Subscription are set out on pages 92 to 98 of this document and an Application Form for use under the Offer for Subscription is set out at the end of this document. Completed Application Forms and the accompanying payment in relation to the Offer for Subscription must be posted or delivered by hand (during normal business hours only) to Anson Registrars Limited, Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 3WX so as to be received by a.m. on 23 May Admission and dealing arrangements Application will be made to the FCA for admission of the Initial Placing and Offer Shares to the Official List (by way of a premium listing under Chapter 15 of the Listing Rules in the case of the New Ordinary Shares and by way of a standard listing under Chapter 14 of the Listing Rules in the case of the New ZDP Shares). Application will also be made to the London Stock Exchange for the Initial Placing and Offer Shares to be admitted to trading on the London Stock Exchange s main market for listed securities. It is expected that Admission of the Initial Placing and Offer Shares will become effective and that unconditional dealings in the Initial Placing and Offer Shares will commence on the London Stock Exchange at 8.00 a.m. (London time) on 29 May The Initial Placing and Offer Shares will be issued in registered form and may be held in certificated or uncertificated form. The Initial Placing and Offer Shares allocated will be issued through the CREST system unless otherwise stated. The Initial Placing and Offer Shares will be eligible for settlement through CREST with effect from Admission. The Company will arrange for CREST to be instructed to credit the appropriate CREST accounts of the applicants concerned or their nominees with their respective entitlements to the Initial Placing and Offer Shares. The names of applicants or their nominees that invest through their CREST accounts will be entered directly on to the share register of the Company. Dealings in the Initial Placing and Offer Shares in advance of the crediting of the relevant stock account shall be at the risk of the person concerned. The Initial Placing and Offer Shares will be denominated in Sterling. 5 Transfer of the Initial Placing and Offer Shares The transfer of the Initial Placing and Offer Shares outside the CREST system should be arranged directly through the Registrar by completing and lodging an appropriate stock transfer form. However, an investor s beneficial holding held through the CREST system may rematerialise, in whole or in part, only upon the specific request of a beneficial owner to CREST through submitting a stock withdrawal form for share certificates or an uncertificated holding in definitive registered form. If an applicant or transferee requests Initial Placing and Offer Shares to be issued in certificated form and is holding such Initial Placing and Offer Shares outside CREST, a share certificate will be despatched either to them or their nominated agent (at their own risk) within 10 days of completion of the registration process or transfer, as the case may be, of the Initial Placing and Offer Shares. Investors holding a definitive certificate may elect at a later date to hold their Initial Placing and Offer Shares through CREST. 6 Scaling back The Directors are authorised to issue up to 14 million New Ordinary Shares and up to 19 million New ZDP Shares pursuant to the Issues. In the event that the aggregate applications under the Initial Placing and Offer were to exceed 14 million New Ordinary Shares and/or 19 million New ZDP Shares, it would be necessary to scale back applications under the Initial Placing and Offer. In such an event, applications under the Initial Placing and Offer will be scaled back pro rata at the Directors discretion (in consultation with Numis) and thereafter no further commitments will be accepted and the Initial Placing and Offer will be closed. 33

34 c108323pu030 Proof 3: _12:43 B/L Revision: In addition, it may also be necessary to scale back applications of New Ordinary Shares and/or New ZDP Shares to ensure that, following the Initial Placing and Offer, either: (i) the Cover Test is met; or (ii) Cover is otherwise maintained or is increased. 7 Commissions Numis will be entitled to a commission payable by the Company in connection with monies raised under the Initial Placing and Offer. No commissions are payable by the Company to Placees under the Initial Placing and Offer. 8 Overseas Persons The attention of potential investors who are not resident in, or who are not citizens of, the UK is drawn to the paragraphs below. The offer of New Ordinary Shares and New ZDP Shares under the Initial Placing and Offer to Overseas Persons may be affected by the laws of the relevant jurisdictions. Such persons should consult their professional advisers as to whether they require any governmental or other consent or need to observe any applicable legal requirements to enable them to obtain New Ordinary Shares and/or New ZDP Shares under the Initial Placing and Offer. It is the responsibility of all Overseas Persons receiving this Prospectus and/or wishing to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and Offer to satisfy themselves as to full observance of the laws of the relevant territory in connection therewith, including obtaining all necessary governmental or other consents that may be required and observing all other formalities needing to be observed and paying any issue, transfer or other taxes due in such territory. No person receiving a copy of this document in any territory other than the UK may treat the same as constituting an offer or invitation to him/her, unless in the relevant territory such an offer can lawfully be made to him/her without compliance with any further registration or other legal requirements. Persons (including, without limitation, nominees and trustees) receiving this Prospectus should not distribute or send it to any US Person or in or into the United States or any other jurisdiction where to do so would or might contravene local securities laws or regulations. In particular, investors should note that the Company has not, and will not be, registered under the US Investment Company Act and the offer, placing and sale of the New Ordinary Shares and/or New ZDP Shares have not been, and will not be, registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States. Accordingly, the New Ordinary Shares and the New ZDP Shares are only being offered and sold outside the United States to non-us Persons in reliance on the exemption from registration provided by Regulation S. The New Ordinary Shares and the New ZDP Shares may not be offered, sold, pledged or otherwise transferred or delivered, directly or indirectly, within the United States or to, or for the account or benefit of, any US Person. Any representation to the contrary is a criminal offence in the United States and the re-offer or resale of any New Ordinary Shares and/ or New ZDP Shares in the United States may constitute a violation of US law. The Company reserves the right to treat as invalid any agreement to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and Offer if it appears to the Company or its agents to have been entered into in a manner that may involve a breach of the securities legislation of any jurisdiction. 34

35 c108323pu030 Proof 3: _12:43 B/L Revision: PART 3: THE PLACING PROGRAMME 1 Details of the Placing Programme Following the Initial Placing and Offer, the Directors intend to implement the Placing Programme. Pursuant to the Placing Programme, the Directors are authorised to issue up to 14 million New Ordinary Shares and up to 19 million New ZDP Shares less any such shares issued pursuant to the Initial Placing and Offer. The Placing Programme is being implemented to enable the Company to satisfy demand for its Ordinary Shares and ZDP Shares as well as to increase the size of the Company. The Net Proceeds of the Placing Programme are dependent on subscriptions received pursuant to both the Initial Placing and Offer and the Placing Programme. Assuming that Gross Proceeds of 30,000,000 are raised under the Initial Placing and Offer and Gross Proceeds of a further 30,000,000 are raised under the Placing Programme, the Net Proceeds of the Placing Programme only would be approximately 29,650,000 with expenses (including any commission) of approximately 350,000. These expenses will be met out of the Gross Proceeds of the Placing Programme. The Directors intend to apply the Net Proceeds of the Placing Programme in making investments in accordance with the Company s investment objective and policy. The Placing Programme is not being underwritten. New Shares will be issued from 8.00 a.m. on 30 May 2013 until 8.00 a.m. on 7 May The issue of New Shares pursuant to the Placing Programme is at the discretion of the Directors. In the event that there are any significant changes affecting any of the matters described in this document or where any significant new matters have arisen after the publication of this document and prior to Admission, the Company will publish a supplementary prospectus. Any supplementary prospectus published will give details of the significant change(s) or the significant new matter(s). 2 Conditions The Placing Programme is conditional on the following: (i) the Placing Programme Price being determined by the Directors as described below; (ii) Admission of the New Shares issued pursuant to such issue under the Placing Programme; and (iii) a valid prospectus being published by the Company if such is required by the Prospectus Rules. In circumstances where these conditions are not fully met, the relevant issue of New Ordinary Shares and/or New ZDP Shares pursuant to the Placing Programme will not take place. 3 Placing Programme Price Placing Programme Price per New Ordinary Share The Placing Programme Price per New Ordinary Share will be determined by the Company and may be at a premium to the Net Asset Value per Ordinary Share, or at a discount to the Net Asset Value per Ordinary Share in the following circumstances: (i) where New ZDP Shares are issued at the same time at a premium such that the combined effect of the issue of both New Ordinary Shares at a discount to NAV and the issue of New ZDP Shares at a premium is that NAV per Ordinary Share is increased; and (ii) where there is no increase in gearing. The Directors will determine the Placing Programme Price per Ordinary Share on the basis described above so as to cover the costs and expenses of each issue under the Placing Programme and thereby avoid any dilution of the Net Asset Value of the existing Ordinary Shares. The Placing Programme Price per New Ordinary Share will be announced through an RIS as soon as is practicable following each issue. Placing Programme Price per New ZDP Share The Placing Programme Price per New ZDP Share will be determined by the Company and will be at a premium to Net Asset Value per New ZDP Share to avoid any reduction in the Cover of the existing ZDP Shares. 35

36 c108323pu030 Proof 3: _12:43 B/L Revision: 4 Admission and dealing arrangements Application will be made to the FCA for admission of the New Shares (i) to the Official List (by way of a premium listing under Chapter 15 of the Listing Rules in the case of the New Ordinary Shares and by way of a standard listing under Chapter 14 of the Listing Rules in the case of the New ZDP Shares); and (ii) to the London Stock Exchange s main market for listed securities. It is expected that Admission of the relevant New Shares will take place 4 Business Days after their issue. The New Shares will be issued in registered form and may be held in uncertificated form. The New Shares allocated will be issued to Placees through the CREST system unless otherwise stated. The New Shares will be eligible for settlement through CREST with effect from Admission. The Company will arrange for CREST to be instructed to credit the appropriate CREST accounts of the Placees concerned or their nominees with their respective entitlements to the New Shares. The names of Placees or their nominees that invest through their CREST accounts will be entered directly on to the share register of the Company. Dealings in the New Shares in advance of the crediting of the relevant stock account shall be at the risk of the person concerned. The New Shares will be denominated in Sterling. 5 Scaling back The Directors are authorised to issue up to 14 million New Ordinary Shares and up to 19 million New ZDP Shares pursuant to the Issues. In the event that the aggregate applications under the Initial Placing and Offer and the Placing Programme were to exceed 14 million New Ordinary Shares and/or 19 million New ZDP Shares, it would be necessary to scale back applications under the Placing Programme. In such an event, applications under the Placing Programme will be scaled back pro rata at the Directors discretion (in consultation with Numis) and thereafter no further commitments will be accepted and the Placing Programme will be closed. In addition, it may also be necessary to scale back applications of New Ordinary Shares and/or New ZDP Shares to ensure that, following the Initial Placing and Offer and each issue under the Placing Programme, either: (i) the Cover Test is met; or (ii) Cover is otherwise maintained or is increased. 6 Overseas Persons The attention of potential investors who are not resident in, or who are not citizens of, the UK is drawn to the paragraphs below. The offer of New Ordinary Shares and/or New ZDP Shares pursuant to the Placing Programme to Overseas Persons may be affected by the laws of the relevant jurisdictions. Such persons should consult their professional advisers as to whether they require any governmental or other consent or need to observe any applicable legal requirements to enable them to obtain New Ordinary Shares and/or New ZDP Shares pursuant to the Placing Programme. It is the responsibility of all Overseas Persons receiving this Prospectus and/or wishing to subscribe for New Ordinary Shares and/or New ZDP Shares pursuant to the Placing Programme to satisfy themselves as to full observance of the laws of the relevant territory in connection therewith, including obtaining all necessary governmental or other consents that may be required and observing all other formalities needing to be observed and paying any issue, transfer or other taxes due in such territory. No person receiving a copy of this document in any territory other than the UK may treat the same as constituting an offer or invitation to him/her, unless in the relevant territory such an offer can lawfully be made to him/her without compliance with any further registration or other legal requirements. Persons (including, without limitation, nominees and trustees) receiving this Prospectus should not distribute or send it to any US Person or in or into the United States or any other jurisdiction where to do so would or might contravene local securities laws or regulations. In particular, investors should note that the Company has not, and will not be, registered under the US Investment Company Act and the offer, placing and sale of the New Ordinary Shares and/or New ZDP Shares have not been, and will not be, registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States. 36

37 c108323pu030 Proof 3: _12:43 B/L Revision: Accordingly, the New Ordinary Shares and the New ZDP Shares are only being offered and sold outside the United States to non-us Persons in reliance on the exemption from registration provided by Regulation S. Neither the New Ordinary Shares nor the New ZDP Shares may be offered, sold, pledged or otherwise transferred or delivered, directly or indirectly, within the United States or to, or for the account or benefit of, any US Person. Any representation to the contrary is a criminal offence in the United States and the re-offer or resale of any New Ordinary Shares and/ or New ZDP Shares in the United States may constitute a violation of US law. The Company reserves the right to treat as invalid any agreement to subscribe for New Ordinary Shares and/or New ZDP Shares pursuant to the Placing Programme if it appears to the Company or its agents to have been entered into in a manner that may involve a breach of the securities legislation of any jurisdiction. 37

38 c108323pu030 Proof 3: _12:43 B/L Revision: PART 4: INFORMATION ON THE COMPANY 1 Introduction The Company was incorporated in Guernsey and the Ordinary Shares have been admitted to listing by the FCA and traded on the London Stock Exchange since February The ZDP Shares have been admitted to listing by the FCA and traded on the London Stock Exchange since December The Investment Manager is Premier Asset Management (Guernsey) Limited. 2 Investment objective and policy The investment objective of the Company is to provide shareholders with a high income and also the opportunity for capital growth. The Company s investments are held in two portfolios. Its assets comprise investments in equities and fixed interest securities in order to achieve its investment objective. Approximately 70 per cent. to 80 per cent. of the Company s assets is invested in smaller capitalised United Kingdom companies, admitted to the Official List of the FCA and traded on the London Stock Exchange or traded on AIM at the time of investment. The Company also aims to enhance income for Ordinary Shareholders by investing approximately 20 per cent. to 30 per cent. of its assets in high yielding instruments which are predominantly fixed interest securities but may include up to 15 per cent. of the Company s overall portfolio (measured at the time of acquisition) in high yielding investment company shares. The proportion of the overall portfolio held in the Smaller Companies Portfolio and the Income Portfolio varies from day to day as the market prices of investments move. The Directors retain discretion to transfer funds from one Portfolio to the other and generally expect between 70 per cent. to 80 per cent. of the investments to be held in the Smaller Companies Portfolio. While the Company s investment policy is to spread risk by maintaining diversified Portfolios, there are no restrictions on the proportions of either of the Portfolios which may be invested in any one geographical area, asset class or industry sector. However, not more than 7.5 per cent. of the Company s gross assets may be invested in securities issued by any one company as at the time of investment, save that (i) in respect of the Income Portfolio only, investments may be made in other investment funds subject only to the restriction set out in paragraph (c) of the paragraph headed Investment Restrictions below; and (ii) in respect of the Smaller Companies Portfolio only, provided that not more than 10 per cent. of the Company s gross assets are invested in securities issued by any one company at any time, the 7.5 per cent. limit may be exceeded on a short term basis, with Board approval, where a company whose securities form part of the Smaller Companies portfolio issues new securities (for example by way of a rights issue). The Company s capital structure is such that the underlying value of assets attributable to the Ordinary Shares is geared relative to the rising capital entitlements of the ZDP Shares. The Company s gearing policy is not to employ any further gearing through long-term bank borrowing. Save with the prior sanction of ZDP Shareholders, the Company will incur no indebtedness other than short term borrowings in the normal course of business such as to settle share trades or borrowings to finance the redemption of the ZDP Shares. Derivatives The Company may invest in derivatives, money market instruments and currency instruments including contracts for differences, futures, forwards and options. These investments may be used for hedging positions against movements in, for example, equity markets, currencies and interest rates. In addition, these instruments will only be used for efficient portfolio management purposes. The Company will not use such instruments to engage in trading transactions. The Company will not maintain derivative positions should the total underlying exposure of these positions exceed one times adjusted total capital and reserves. Investment restrictions For so long as required by the Listing Rules in relation to closed-ended investment companies, the Company has adopted the following investment and other restrictions: (a) (b) the Company will 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; the Company will not conduct any significant trading activity; and 38

39 c108323pu030 Proof 3: _12:43 B/L Revision: (c) not more than 10 per cent. in aggregate of the value of the total assets of the Company at the time the investment is made will be invested in other listed closed-ended investment funds. The Listing Rules provide an exception to this restriction to the extent that those investment funds have stated investment policies to invest no more than 15 per cent. of their total assets in other listed closed-ended investment companies. 3 Investment strategy The Portfolios, which had a combined value of million as at the Latest Practicable Date, are as follows: Smaller Companies Portfolio The Smaller Companies Portfolio is invested predominantly in equities of UK companies with a market capitalisation of under 1 billion. The focus is on companies with experienced and wellmotivated management, products or services supplying growth markets, sound operational and management controls, good cash generation and a progressive dividend. The Smaller Companies Portfolio is predominantly invested in securities which are admitted to the Official List of the FCA and traded on the London Stock Exchange or traded on AIM at the time of investment. There is no fixed allocation to any industry sectors and the Smaller Companies Portfolio is invested in a diversified spread of industry sectors, but has limited exposure to certain sectors which do not generally satisfy the requirement for good cash generation and progressive dividends. Income Portfolio The assets in the Income Portfolio comprise sterling denominated fixed interest securities, including corporate bonds, preference and permanent interest bearing shares, convertible securities, reverse convertible bonds, contingent convertible bonds, debentures and other similar securities and securities issued by open-ended bond funds. However, not all of these investments are necessarily held in this portfolio at any one time. The Income Portfolio may also contain higher yielding shares of other investment companies, including property investment companies, not exceeding 15 per cent. of the overall portfolio at the time of investment. It may also contain instruments denominated in other currencies in respect of which the currency exposure is generally hedged. There is no fixed allocation between unrated investments (being those which have not been given a credit rating), investment grade securities and non-investment grade securities. The proportion of the overall portfolio held in the Smaller Companies Portfolio and the Income Portfolio varies from day to day as the market prices of investments move. The Directors retain discretion to transfer funds from one portfolio to the other and generally expect between 70 per cent. to 80 per cent. of the investments to be held in the Smaller Companies Portfolio. 4 Investment Manager and Investment Advisers Premier Asset Management (Guernsey) Limited Investment Manager Premier Asset Management (Guernsey) Limited is wholly-owned by Premier Asset Management Limited, a privately owned asset management group. The principal beneficial shareholders are the management team and Electra Private Equity PLC. Via its FCA-regulated subsidiaries, Premier Asset Management Limited manages a range of authorised UK and offshore funds, including closed-ended investment companies, as well as providing discretionary portfolio management services for private and corporate clients. The group currently has approximately 2.2 billion of assets under management based on valuations as at 31 March Premier Asset Management (Guernsey) Limited (formerly known as BFS Investments (Guernsey) Limited) was incorporated in Guernsey with registered number on 3 April 2001 under The Companies (Guernsey) Laws, 1994 to 1996, as amended, as a limited liability company with its registered office at Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey, GY1 1EJ. The contact telephone number is The Investment Manager is regulated by the Guernsey Financial Services Commission and is licensed under The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, to carry on controlled investment business. The Investment Manager s agreement with the Company is summarised in paragraph 14.2 of Part 9. During 2012, the Investment Manager received fees of 226,575 from which payments were made to the Investment Advisers. 39

40 c108323pu030 Proof 3: _12:43 B/L Revision: Premier Fund Managers Limited Investment Adviser to the Income Portfolio Premier Fund Managers Limited, which is authorised and regulated by the FCA, is a subsidiary of Premier Asset Management Limited. Premier Fund Managers Limited was incorporated in England and Wales with registered number on 5 July 1988 and has its registered office address at Eastgate Court, High Street, Guildford, Surrey GU1 3DE (telephone number ). The senior investment manager responsible for the Income Portfolio is Paul Smith. Paul Smith has managed fixed income portfolios at Premier since He manages Premier s Strategic High Income Bond Fund, Corporate Bond Monthly Income Fund and UK Money Market Fund. In 2011, he was awarded the Investment Week Fund Manager of the Year Award for the money market sector. He has a First Class honours degree in Economics and an MA in Finance and Investment (with distinction) from Exeter University. Unicorn Asset Management Limited Investment Adviser to the Smaller Companies Portfolio Unicorn Asset Management Limited, which is authorised and regulated by the FCA, was incorporated in England and Wales with registered number on 4 February 2000 and has its registered office address at First Floor Office, Preachers Court, The Charterhouse, Charterhouse Square, London, EC1M 6AU (telephone number ). Unicorn Asset Management Limited ( Unicorn ) is a privately owned company, with the directors and management owning 45.7 per cent. of the shares. The company manages a range of UK authorised funds, including a venture capital trust and an open-ended investment company (OEIC) with five sub-funds. At 23 April 2013, Unicorn had approximately 278 million of assets under management. The director responsible for the Smaller Companies Portfolio is John McClure who has 24 years experience of running smaller companies portfolios. John has been involved in the Smaller Companies Portfolio of the Company since inception and is solely responsible for the Unicorn UK Income Fund. 5 Investment philosophy, process, criteria and rationale Higher dividend paying smaller company shares have provided consistently better returns over the last 58 years than companies paying lower levels of dividend which, in turn, have provided consistently better returns than companies paying no dividend at all. These were the conclusions of a comprehensive study of UK smaller and mid-sized companies carried out by Professors Elroy Dimson and Paul Marsh of the London Business School. In the period from 1955 to 2012, smaller companies as a whole (as represented by the Numis Smaller Companies Index) outperformed the FTSE All-Share Index returning an annualised 15.3 per cent. against 11.9 per cent. on the FTSE All-Share Index. Within the smaller companies universe, higher-yielding companies delivered an annualised return of 18.4 per cent., lower yielders, 13.6 per cent., and non-payers 9.1 per cent. Higher yielders are defined as the 30 per cent. of dividend paying shares within the index with the highest yields. Lower yielders are the 30 per cent. of dividend paying shares within the index with the lowest yields. Dimson and Marsh calculated that over 57 years a portfolio of the higher yielding shares would have been worth 10 times the value of a portfolio of the lower yielding shares and 100 times the value of a portfolio of the non-payers (Source: Numis Smaller Companies Index 2013 Annual Review, published on 16 January 2013). 6 Performance record The Company s performance has been strong in both absolute and relative terms as illustrated by the following returns: Cumulative total return % 1 year 3 years 5 years 10 years NAV per Ordinary Share Ordinary Share price Numis Smaller Companies Index (excluding Investment Companies) Source: Datastream to 30 April

41 c108323pu030 Proof 3: _12:43 B/L Revision: The table below shows the ranking of the Company against the listed closed-ended funds in the UK Growth and Income, UK High Income, UK High Income (Smaller Companies), UK Mid-Cap and UK Smaller Companies sectors combined: Ranking 1 year 3 years 5 years 10 years Acorn Ranking Share Price Total Return 1/47 1/46 1/44 2/39 Acorn Ranking NAV Total Return 2/47 1/46 1/44 2/39 Source: Datastream to 30 April 2013 Measured on an Ordinary Share price total return, the Company is the top performing fund in all IMA open-ended fund UK sectors over one year, three years, five years and ten years. Measured on a NAV total return, the Company is the top performing fund in all IMA open-ended fund UK sectors over one year and three years, second over five years and ranked third over the ten year period. The table below shows the ranking of the Company against the UK Equity Income, UK Equity and Bond Income, UK Smaller Companies and UK All Companies sectors combined: Ranking 1 year 3 years 5 years 10 years Acorn Ranking Share Price Total Return 1/447 1/425 1/387 1/278 Acorn Ranking NAV Total Return 1/447 1/425 2/387 3/278 Source: FE Analytics for open-ended funds periods and Datastream for Acorn Income Fund Limited share returns, both to 30 April Gearing policy and restrictions The Company has no restrictions on gearing or borrowings in its Articles. ZDP Shares are treated as debt under applicable International Accounting Standards. As at the Latest Practicable Date, the Company had gross assets of million and debt (in the form of the Existing ZDP Shares) of million. The gearing ratio of debt to gross assets at that date was therefore per cent. This gearing ratio changes as the entitlements of ZDP Shareholders accrue over time and as a result of other factors such as investment performance, distributions and the issue or redemption of Ordinary Shares and/or ZDP Shares. In order to protect the interests of ZDP Shareholders, the Company will not, without the prior sanction of the ZDP Shareholders at a separate class meeting, incur any bank borrowings (other than short term indebtedness in the normal course of business, such as when settling share transactions) except where such borrowings are for the purpose of paying the Final Capital Entitlement due to holders of ZDP Shares. However, this will not prevent gearing increasing as a result of investments falling in value. There are no set gearing limits. 8 Dividends, distributions and dividend policy The ZDP Shares do not carry a right to a dividend. Dividends may be paid to holders of Ordinary Shares whenever the financial position of the Company, in the opinion of the Directors, justifies such payment, subject to the Company being able to satisfy the solvency test, as defined under the Law, immediately after payment of such dividend. The Company may by ordinary resolution from time to time declare dividends. The dividend policy adopted by the Board is to typically pay dividends to holders of Ordinary Shares quarterly in March, June, September and December. The dividends paid on each Ordinary Share in respect of the last three financial years were as follows: 6.25 pence (2010); 7.00 pence (2011); and pence (2012). On 22 February 2013, the Company declared a first interim dividend of 3.00 pence per Ordinary Share (2012: 3.00 pence per Ordinary Share) for the year ending 31 December The Directors have declared a second interim dividend for the year ending 31 December 2013 of 2 pence per Ordinary Share, to which the New Ordinary Shares will not be entitled as the record date of 17 May 2013 falls before the expected issue date of the New Ordinary Shares. The Directors anticipate declaring a third interim dividend of 1 pence, with a record date in June 2013, and thereafter to resume quarterly payments of dividends. The payment of both the second and third interim dividends is intended to be in June

42 c108323pu030 Proof 3: _12:43 B/L Revision: 9 Share repurchases At the last annual general meeting held on 22 August 2012, the Company was granted authority to make market purchases of a maximum aggregate number of up to per cent. of the Ordinary Shares then in issue and up to per cent. of the ZDP Shares then in issue. The Directors may purchase Ordinary Shares and/or ZDP Shares provided that (i) the Cover Test would be immediately met following any such purchase; or (ii) Cover is otherwise increased as a result of and on such purchase. The Company s authority to make market purchases of the Ordinary Shares and ZDP Shares will expire at the conclusion of the next annual general meeting to be held in A renewal of the authority to make market purchases of Ordinary Shares and ZDP Shares will be sought from the shareholders at each annual general meeting. 42

43 c108323pu040 Proof 3: _12:43 B/L Revision: PART 5: DIRECTORS AND CORPORATE GOVERNANCE 1 Directors The Directors are Helen Green, Nigel Ward and David Warr. All three directors of the Board are non-executive directors and are considered independent of the Investment Manager. Helen Green (Non-executive Chairman) Helen is a chartered accountant. She has been employed by Saffery Champness, a top 20 firm of chartered accountants, since She qualified as a chartered accountant in 1987 and became a partner in the London office in Since 2000 she has been based in the Guernsey office where she is client liaison director responsible for trust and company administration. Helen serves on the boards of LSE listed companies Tamar European Industrial Fund Limited and Henderson Diversified Income Limited and AIM listed companies Landore Resources Limited and Advance Frontier Markets Fund Limited. Helen is a resident of Guernsey. Nigel Ward (Non-executive Director) Nigel Ward is a full-time independent non-executive director and serves on the board of several offshore funds and companies, including London and Channel Islands Stock Exchange listings. He has extensive experience of international investment markets, credit and risk analysis, portfolio management, banking, corporate governance and the managed funds industry. He spent 20 years at Baring Asset Management, and was also with TSB Bank, National Westminster Bank and Bank Sarasin. He is a founding Commissioner of the Guernsey Police Complaints Commission, an Associate of the Institute of Financial Services, a member of the Institute of Directors and has obtained the IoD Certificate & Diploma in Company Direction. He is resident in Guernsey. Nigel was appointed to the Board on 1 December David Warr (Non-executive Director) David is a Fellow of the Institute of Chartered Accountants in England and Wales having qualified as a chartered accountant in In 1981 David was appointed a partner in Reads & Co., a Guernsey-based firm of chartered accountants, which he helped develop into a more broadly based financial services business leading up to its sale at the end of David s experience at Reads & Co. included audit, trust and company administration. David now acts as a non-executive director on a number of UK listed companies while combining those responsibilities with charitable work most noticeably as Vice-Chairman of The Guernsey Community Foundation LBG. David is also a resident of Guernsey. The business address of each of the Directors is Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 1EJ. 2 Corporate governance Statement of Compliance with the UK Code on Corporate Governance (the Code ) Due to the Ordinary Shares having a premium listing on the London Stock Exchange, the Company has to comply with Listing Rule 9.8.6(5)R which requires the Company to apply the provisions of the Code to the extent that they are considered relevant to the Company. The directors place a high degree of importance on ensuring that high standards of corporate governance are maintained within the Company. The Code is available for download from the Financial Reporting Council s website The Board has noted that the revised edition of the Code is effective for financial years commencing on or after 1 October As such, the Company will report against the revised Code in its annual financial report for the year ended 31 December With effect from 1 January 2012, the Company was also required to comply with the Guernsey Financial Services Commission Financial Sector Code of Corporate Governance (the Guernsey Code ). As the Company reports under the Code it is deemed to meet the Guernsey Code and the Board has undertaken to evaluate its corporate governance compliance on an on-going basis. The Company has complied with the main principles of the Code, except as set out below. The Code includes provisions relating to: * the role of the chief executive; 43

44 c108323pu040 Proof 3: _12:43 B/L Revision: * executive directors remuneration; and * the need for an internal audit function. For the reasons set out in the preamble to the Code, the Board considers these provisions are not relevant to the Company. The Company has therefore not reported further in respect of these provisions. Other areas of non-compliance with the Code by the Company, and the reasons therefore, are as follows: * There is no Senior Independent Director. This is not in accordance with provision A.4.1 of the Code but is felt to be appropriate for the size and nature of the Company. * The non-executive directors of the Company do not meet without the Chairman present to appraise the Chairman s performance which is not in accordance with provision A.4.2. However, the Company has approved a Chairman Performance Evaluation Questionnaire during the period for completion by the Directors on an annual basis to facilitate the review of the Chairman s performance. * The Board did not undertake a formal performance evaluation of the Board, its committees or the individual directors during the year ending 31 December 2012 as required by provision B.6.1 and B.6.3 of the Code respectively. However, the Company has approved a Board and individual director Performance Evaluation Questionnaire for review and completion on an annual basis. In accordance with the Articles, the Directors are not subject to re-election by the Ordinary Shareholders nor are they appointed for specific terms as required by these provisions as this is not felt to be appropriate for the size and nature of the Company. However, the Board has determined, in order to facilitate good corporate governance practice, each director will offer themselves for re-election every 6 years. The Board meets at least quarterly to consider the affairs of the Company in a prescribed and structured manner. All directors are considered independent of the Investment Manager for the purposes of the Code and listing rule A. The Directors, in the furtherance of their duties, may take independent professional advice at the Company s expense which is in accordance with provision B.5.1 of the Code. The Directors also have access to the advice and services of the company secretary through its appointed representatives who are responsible to the Board for ensuring that the Board s procedures are followed and that applicable rules and regulations are complied with. To enable the Board to function effectively and allow directors to discharge their responsibilities, full and timely access is given to all relevant information. Audit Committee In accordance with the Code an audit committee has been established consisting of Helen Green, David Warr and Nigel Ward. David Warr replaced Helen Green as Chairman of the Audit Committee with effect from 22 August The committee meets at least twice a year and reviews, inter alia, the financial reporting process and the system of internal controls and management of financial risks including understanding the current areas of greatest financial risk and how these are managed by the Investment Manager, reviewing annual financial statements, assessing the fairness of preliminary and interim statements and disclosures and reviewing the external audit process. The committee is responsible for overseeing the Company s relationship with the external auditors, including making recommendations to the Board on the appointment of the external auditors and their remuneration. The committee considers the nature, scope and results of the auditor s work and reviews, and develops and implements policy on the supply of any non-audit services that are to be provided by the external auditors. The committee receives and reviews reports from the Investment Manager and the Company s external auditors relating to the Company s annual report and financial statements. The committee focuses particularly on compliance with legal requirements, accounting standards and the Listing Rules and ensures that an effective system of internal financial and non-financial controls is maintained. The ultimate responsibility for reviewing and approving the annual report and financial statements remains with the Board. Nomination Committee In accordance with the Code, a nomination committee was established during the year ended 31 December 2012, consisting of Helen Green, David Warr and Nigel Ward. David Warr has been 44

45 c108323pu040 Proof 3: _12:43 B/L Revision: appointed Chairman. The nomination committee met on 24 April 2013 and will meet at least once a year in accordance with the terms of reference and reviews, inter alia, the structure, size and composition of the Board and is required to make recommendations to the Board evaluating candidates from a wide range of backgrounds through open advertising. Whilst considering the composition of the Board, the nomination committee will be mindful of diversity, inclusiveness and meritocracy and, in considering a new candidate, the nomination committee will apply comparative analysis of candidates qualifications and experience, applying pre-established clear, neutrally formulated and unambiguous criteria to determine the most suitable candidate sought for the specific position. Other duties of the nomination committee are to give full consideration to succession planning for directors, to regularly review the leadership needs of the non-executive directors, ensure non-executive directors receive a formal letter of appointment and to review the results of the Board s performance evaluation process. Remuneration and Management Engagement Committee ( RME ) In accordance with the Code, a RME committee was established during the period under review, consisting of Helen Green, David Warr and Nigel Ward. Nigel Ward has been appointed Chairman. The RME committee shall meet at least once a year to determine and agree with the Board the framework for the remuneration of the Company s Chairman, directors and service providers, taking into account remuneration trends and all other factors which it deems necessary. The RME committee also reviews all contractual terms of third parties to ensure their compliance. 3 Conflicts of interest There are no conflicts of interest between: (i) any duties to the Company of any of the Directors or of the Investment Manager or of the Investment Advisers; and (ii) their private interests and/or other duties. 45

46 c108323pu040 Proof 3: _12:43 B/L Revision: PART 6: PORTFOLIO INFORMATION The information set out in this Part 6 represents the Portfolios of the Company as at the Latest Practicable Date. The information in this Part 6, which has not been audited, has been sourced from information supplied by Premier Asset Management (Guernsey) Limited in its capacity as investment manager of the Company. 1 Gross asset value At the Latest Practicable Date, the Portfolios comprised 71 investments with an aggregate value, on that date, of million, valued as at their closing bid prices in respect of listed investments and based on the Directors fair value valuations in respect of unlisted investments in accordance with the Company s accounting policies. 2 Top 15 holdings The top fifteen holdings in each Portfolio and the percentage each represents of the Company s gross assets (in both Portfolios) at the Latest Practicable Date were: Smaller Companies Portfolio Valuation GBP Total Assets % Tyman plc 1,782, % VP plc 1,555, % British Polythene Industries 1,553, % Diploma plc 1,488, % Secure Trust Bank plc 1,452, % Castings plc 1,412, % James Halstead plc 1,401, % Consort Medical plc 1,360, % Acal plc 1,287, % Brewin Dolphin Holdings plc 1,207, % UK Mail Group plc 1,201, % Devro plc 1,195, % RPC Group plc 1,193, % Lookers plc 1,131, % Harvey Nash Group plc 1,095, % 19,973, % Income Portfolio Valuation GBP Total Assets % Real Estate Credit Preference Shares NPV 424, % GE Capital Funding 8% 14/01/ , % Credit Suisse 7.875% 24/02/ , % GLI Finance Limited 329, % Kelda Finance 3 plc 5.75% 17/02/ , % Standard Life UK 3.5% CULS 31/03/ , % Lloyds TSB 11 7 / 8 16/12/ , % F&C Finance plc 9% 20/12/ , % Jurdica Ord NPV 273, % Unite Group 6.125% 12/06/ , % Aviva plc % Perp , % Fidelity International 7.125% 13/02/ , % Marks & Spencer 4.75% 12/06/ , % SSE plc 6.25% 27/08/ , % Punch Taverns 7.27% 15/07/22 206, % 4,308, % 46

47 c108323pu040 Proof 3: _12:43 B/L Revision: 3 Total portfolio geographical analysis Country Percentage of Portfolio United Kingdom 95.59% United States of America 3.32% Switzerland 1.07% Norway 0.02% 100% 4 Analysis of Smaller Companies Portfolio Index Category Percentage of Portfolio FTSE Small Cap 56.0% FTSE AIM 17.1% FTSE % FTSE Fledgling 9.3% Cash 2.6% Total 100% 5 Analysis of Income Portfolio Category Percentage of Portfolio Other Fixed Interest 74.1% Cash 9.6% Other Closed-ended Funds 7.3% Contingent Convertibles 4.3% Convertibles 3.5% Bond Funds 1.9% Futures and Options -0.8% Total 100% 6 Net Asset Value At the Latest Practicable Date, the Portfolios had a value of million, of which per cent. was represented by the Smaller Companies Portfolio and per cent. by the Income Portfolio. The aggregate capital entitlement of the ZDP Shares was million (equivalent to pence per ZDP Share) and the Company s net assets at that date were million (equivalent to pence per Ordinary Share). Unless otherwise indicated, the information set out in this Part 6 is unaudited, has been extracted from internal management accounting records maintained by the Company and is consistent with the Company s accounting policies. 47

48 c108323pu040 Proof 3: _12:43 B/L Revision: PART 7: FINANCIAL AND OTHER INFORMATION ON THE COMPANY The following is a discussion of the Company s results of operations and financial condition for the 2010 financial year, the 2011 financial year and the 2012 financial year. Prospective investors should read the following discussion, together with the whole of this document, including the Risk Factors, and the Company s historical consolidated financial statements and should not just rely on the key or summarised information contained in this Part 7. The financial information in this Part 7 has been extracted without material adjustment from the Company s accounting records. This Part 7 contains forward-looking statements. Those statements are subject to risks, uncertainties and other factors that could cause the Company s future results of operations or cashflows to differ materially from the results of operations or cashflows expressed or implied in such forward-looking statements. 1 Introduction 1.1 The Company s auditors are KPMG Channel Islands Limited of 20 New Street, St Peter Port, Guernsey GY1 4AN, which is registered to carry on audit work by the Institute of Chartered Accountants in England and Wales ( ICAEW ) firm number C Save for the historical information for the three financial years ended 31 December 2012 set out, or incorporated by reference, in paragraph 3.1 of this Part 7, none of the information in this document has been audited. Unless otherwise indicated, all unaudited financial information relating to the Company contained in this document has been sourced, without material adjustment, from the internal accounting records of the Company which are maintained by the Administrator on the Company s behalf on a basis consistent with the Company s accounting policies. 2 Accounts for the three financial years ended 31 December 2012 The accounts for the Company for the three financial years ended 31 December 2012 (prepared in accordance with International Financial Reporting Standards and the AIC SORP), in respect of which KPMG Channel Islands Limited issued unqualified reports under section 262 of the Law, did not contain any statements under section 263 as applicable. 3 Published annual reports and accounts for three financial years ended 31 December Historical information incorporated by reference The annual reports and accounts of the Company for the three financial years ended 31 December 2012 are incorporated into this document by reference in their entirety. The following list is intended to enable investors to identify easily specific items of information which are relevant to the Issues. The page numbers below refer to the relevant pages of the respective Annual Report and Accounts. Annual Report and Accounts for Year Ended 31 December Nature of Information Page No(s) Page No(s) Page No(s) Chairman s Statement Investment Manager s Report Investment Portfolio Risk Factors Directors Report Statement of Directors Responsibilities Independent Auditors Report Income Statement Balance sheet / Statement of Financial Position Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements

49 c108323pu040 Proof 3: _12:43 B/L Revision: 3.2 Selected financial information The key audited figures that summarise the financial condition of the Company in respect of the year ended 31 December 2012 (and the corresponding figures for the years ended 31 December 2011 and 2010) which have been extracted directly on a straightforward basis from the historical information referred to in paragraph 3.1 of this Part 7 (unless otherwise indicated in the notes below the following table) are set out in the following table. Year Ended 31 December Capital Total non-current assets (investments) ( 000) 20,713 22,043 34,359 Total assets ( 000) 21,572 28,257 35,396 Total liabilities ( 000) 4,463 12,018 12,603 Net assets 17,110 16,239 22,793 Net asset value per Ordinary Share (pence) (per IFRS and Articles) Net asset value per ZDP Share (pence) (per IFRS) Net asset value per ZDP Share (pence) (per Articles) Year Ended 31 December Earnings and Dividends Return per Ordinary Share (pence) (1.86) Dividends per Ordinary Share (pence) Return per ZDP Share (pence) Operating and financial review The published annual report and accounts for the Company for the three financial years ended 31 December 2012 included, on the pages specified below, descriptions of the Company s financial condition (in both capital and revenue terms), changes in its financial condition and details of the Company s portfolio of investments for each of those years. Annual Report and Accounts for Year Ended 31 December Section Page No(s) Page No(s) Page No(s) Chairman s Statement Investment Advisers Report Investment Portfolio Availability of Annual Report and Accounts for inspection Copies of the published annual report and audited accounts of the Company for the three financial years ended 31 December 2012 (as filed with the FCA) are available for inspection at the address set out in paragraph 19.1 of Part 9 of this document and at This website does not form part of the Prospectus. 4 Interim management statements At the date of this document, the Company has not published an interim management statement for the six-month period ending on 30 June

50 c108323pu040 Proof 3: _12:43 B/L Revision: 5 Capitalisation and indebtedness The following table shows the unaudited capitalisation and indebtedness of the Company (distinguishing between guaranteed and unguaranteed, secured and unsecured indebtedness) as at 31 March March Total Current Debt Guaranteed Secured Unguaranteed/unsecured Total Non-current Debt Guaranteed Secured Unguaranteed/unsecured 12,705 Shareholders Equity Share capital 89 Treasury shares (303) Share premium and special reserve and capital reserve 25,208 Revenue reserves 223 The following table shows the Company s unaudited net indebtedness as at 31 March A Cash 609 B Cash equivalent C Trading securities 36,820 D Liquidity (A + B + C) 37,429 E Current financial receivable 727 F Current bank debt G Current portion of non-current debt H Other current financial debt (234) I Current financial debt (F + G + H) (234) J Net current financial assets (I E D) 37,922 K Non-current bank loans L Bonds issued M Other non-current loans (12,705) N Non current financial debt (K + L + M) (12,705) O Net financial assets (J + N) 25,217 The Company has no indirect or contingent indebtedness. 6 Accounting policy regarding investment management fees and finance costs The Company will continue to allocate 75 per cent. of the basic management fee payable under the Investment Management Agreement to capital, and will allocate any performance fee payable to capital and revenue based on where the out-performance was achieved. All of the expenses incurred in respect of the Issues will be allocated to capital. Accruing capital entitlements on ZDP Shares will be charged to capital. 50

51 c108323pu040 Proof 3: _12:43 B/L Revision: 7 NAV calculations The Administrator is responsible for calculating the unaudited NAV per Ordinary Share which is calculated weekly at the close of business on each Friday and at the end of each month and announced through an RIS on the following Wednesday. UK listed investments are valued according to the prices issued by the London Stock Exchange, being the closing bid price. Other listed securities are valued at bid prices or last traded price, if appropriate. Unlisted investments are included in the Company s financial statements at valuations determined by the Board. Realised surpluses or deficits on the disposal of investments and permanent impairments in the value of investments are taken to capital reserve. Where trading in the securities of an investee company is suspended, the investment is valued at the Board s estimate of its net realisable value. The calculation of the NAV per Ordinary Share will only be suspended in circumstances where the underlying data necessary to value the Company s investments cannot readily, or without undue expenditure, be obtained. Details of any suspension in making such calculations will be announced through an RIS. The last published unaudited NAV per Ordinary Share prior to the Latest Practicable Date was pence per Ordinary Share. 8 Capital resources At the Latest Practicable Date, the Company s capital resources comprise its share capital and reserves. The Company s cash flows comprise income from dividends and interest generated from its investments and the sale proceeds on realisation of investments. Its payments comprise its costs and administrative overheads, dividends and payments for investments acquired. In the year ended 31 December 2012, being the period covered by the most recently published audited financial information, cash received as net income from investments and interest received amounted to 1,359,333. Expenses for the year ended 31 December 2012 amounted to 511,144 (of which 226,672 were charged to capital). The most significant expense items were investment management fees of 226,575. These vary with the size of the Portfolios. The remainder include fixed costs for administration, including Directors fees and fees payable to the Custodian, Registrar and Auditor. Dividends totalling 1,046,975 were paid during the year. Proceeds of 16,822,771 were received from the sale of portfolio investments and 21,500,190 was spent on acquiring other investments. The amounts due to the ZDP Shareholders are accounted for as debt and the Company s gearing policy is set out in paragraph 7 of Part 4. The amounts due to ZDP Shareholders are payable to them on 31 January On the basis of the Assumptions the Company s gearing ratio of debt to gross assets would be approximately per cent. following the Initial Placing and Offer for Subscription. Save with the prior sanction of ZDP Shareholders, the Company will not take on any bank borrowings (save for short term borrowings in the ordinary course of business such as to settle share trades or borrowings to finance the redemption of the ZDP Shares) until the ZDP Repayment Date. However, this will not prevent gearing increasing as a result of investments falling in value. There are no set gearing limits. For accounting purposes, the Company distinguishes between revenue and capital returns. The Board intends to continue to distribute by way of dividends all the amounts allocated to revenue in its accounts (net of expenses charged to revenue). Under the Company s existing accounting policies, all fees and expenses are charged to revenue except that 75 per cent. of the investment management fee and, if it should arise, 75 per cent. of any bank interest, is charged to capital. Any performance fee payable to the Investment Manager will be allocated to capital and revenue based on where the out-performance was achieved. All of the expenses of the Initial Placing and Offer for Subscription and the accruing returns to ZDP Shareholders will be charged 100 per cent. to capital. Save with the prior sanction of ZDP Shareholders, the Company will not pay any dividends out of the Company s capital reserves. Due to the nature of the Company s assets, substantially all of which may be traded on liquid markets, the liquidity position of the Company is strong. 51

52 c108323pu040 Proof 3: _12:43 B/L Revision: There are no specific restrictions on the use of cash in any loan agreements, but the investments will be managed in accordance with the investment policy and strategy described in paragraphs 2 and 3 of Part 4 of this document, any future variation to which is subject to the approval of Ordinary Shareholders in general meeting under the Listing Rules. Following the Initial Placing and Offer for Subscription, the Company s capital resources will comprise its share capital and reserves and the Net Proceeds of the Initial Placing and Offer for Subscription. The Company s cash flows will continue to comprise income from dividends and interest generated from its investments and the sale proceeds on realisation of investments. Its payments comprise its costs and administrative overheads, dividends and payments for investments acquired. 52

53 c108323pu050 Proof 3: _12:43 B/L Revision: PART 8: PRINCIPAL BASES AND ASSUMPTIONS IN RESPECT OF THE INITIAL PLACING AND OFFER Set out below are the principal bases and assumptions used in calculating the illustrative financial statistics contained in the section: Initial Placing and Offer Statistics of this document in relation to the New ZDP Shares to be issued under the Initial Placing and Offer. For the avoidance of doubt, the Assumptions have not been used in preparing the working capital statement set out in paragraph 11 of Part 9 of this document. There can be no guarantee that the Assumptions set out below will be realised. In particular, the amounts raised by the Initial Placing and Offer may differ from the assumed amounts; market gains or losses between the date of this document and the date of Admission will affect the amount of the Company s assets at Admission; costs will be incurred in investing the net proceeds of the Initial Placing and Offer; annual running expenses of the Company may exceed the assumed level. Accordingly, no reliance should be placed on the illustrative financial statistics derived from the Assumptions set out below. The attention of prospective investors is also drawn to the Risk Factors set out in this document. The Assumptions used are: 1 On the Latest Practicable Date, the Company had 8,939,790 Ordinary Shares in issue, 12,000,000 ZDP Shares in issue, gross assets of million and the NAV per Ordinary Share was pence. 2 Gross proceeds of million are raised pursuant to the Initial Placing and Offer by the issue on 29 May 2013 (the anticipated date of Admission) of 7.0 million New Ordinary Shares at pence per New Ordinary Share and million New ZDP Shares at pence per New ZDP Share. 3 The total costs of 370,000 (including non-recoverable value added tax) are deducted from the Gross Proceeds of the Initial Placing and Offer. 4 No allowance is made for the costs of investing the Net Proceeds of the Initial Placing and Offer. 5 The capital accrual of the New ZDP Shares is 6.5 per cent. per annum, compounded monthly from 29 May 2013 (the anticipated date of Admission) up to (but excluding) the ZDP Repayment Date. The Final Capital Entitlement of 138 pence per New ZDP Share is paid on 31 January The Cover of the New ZDP Shares is calculated as the ratio of (i) the gross assets of the Company as at the Latest Practicable Date, plus the assumed net proceeds of the Initial Placing and Offer, less the current liabilities and accrued charges (other than debt) less 297,000 (being the amount standing to the credit of the Company s revenue reserves as at 31 December 2012) to (ii) the sum of the amount required to pay the Final Capital Entitlement plus the cumulative management fees to be charged to capital over the period from the date of the calculation of the Cover to the ZDP Repayment Date (see assumption 7 below). 7 The fees to be charged to capital for the period to the ZDP Repayment Date for the purposes of calculating the Cover are based on the value of the Company s gross assets at the date of calculation plus the assumed Net Proceeds of the Initial Placing and Offer. The calculation of such fees is based on the assumption that there is no change in the value of the Company s assets over the relevant future period. 8 There are no material changes to the basis on which the Company charges expenses to its revenue and capital accounts prior to the ZDP Repayment Date. 9 Other than the issues under the Initial Placing and Offer, there are no changes to the number of Ordinary Shares or ZDP Shares prior to the ZDP Repayment Date. 10 No corporation tax or capital gains tax is payable by the Company; and no other changes occur in any relevant taxation law and practice. 11 There are no changes to generally accepted accounting practices relevant to the Company and no changes to its accounting policies. 53

54 c108323pu050 Proof 3: _12:43 B/L Revision: PART 9: ADDITIONAL INFORMATION 1 Information on the Company 1.1 Acorn Income Fund Limited was incorporated in Guernsey with an unlimited life on 5 January 1999 with registered number under the Companies (Guernsey) Laws 1994 to 1996, as amended, as an authorised closed-ended investment company. The Company is an authorised closed-ended investment scheme, authorised pursuant to The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and the Authorised Closed-ended Investment Schemes Rules The registered office of the Company is at Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 1EJ (telephone number ). 1.3 The New Ordinary Shares and the New ZDP Shares will be issued in registered form and, from Admission, will be capable of being held in uncertificated form and title to such shares may be transferred by means of a relevant system (as defined in the CREST Regulations). Where New Ordinary Shares and/or New ZDP Shares are held in certificated form, share certificates will be sent to the registered members or their nominated agent (at their own risk) within 10 days of completion of the registration process or transfer, as the case may be, of the New Ordinary Shares and/or New ZDP Shares. Where New Ordinary Shares or New ZDP Shares are held in CREST, the relevant CREST stock account of the registered members will be credited. 2 Share capital of the Company 2.1 The Company was incorporated with an authorised share capital of 10,000,000 divided into 40,000,000 Ordinary Shares of 25 pence each. Following the adoption of the Articles on 24 April 2013, the Company has no authorised share capital. 2.2 At an extraordinary general meeting held on 5 January 2007, it was resolved that the then issued share capital of the Company be reduced from 7,400, to 296,000.02, effected by the cancellation of 24 pence per issued Ordinary Share, thus reducing the nominal amount of such shares from 25 pence to 1 pence per Ordinary Share. As a result of a tender offer in January 2007, the Company repurchased 20,660,212 Ordinary Shares, leaving 8,939,790 Ordinary Shares in issue. 2.3 On 21 December 2011, the Company issued 12,000,000 ZDP Shares. 2.4 During the financial year ended 31 December 2010, the Company repurchased 165,000 Ordinary Shares and a further 50,000 Ordinary Shares during the financial year ended 31 December The Company held 215,000 Ordinary Shares in treasury at 31 December On 24 April 2013, these Ordinary Shares were sold by the Company. At the date of this document, the Company holds no Ordinary Shares in treasury. 2.6 The issued share capital of the Company as at the date of this document, all of which is fully paid, is as follows: Issued Number Nominal ( ) Ordinary Shares 8,939, ZDP Shares 12,000, At a general meeting of the Company held on 24 April 2013, Ordinary Shareholders gave the Directors authority to issue up to 14 million New Ordinary Shares and up to 19 million New ZDP Shares. At a class meeting of the Company held on 24 April 2013, ZDP Shareholders consented to the issue of up to 19 million New ZDP Shares. 2.8 Assuming the Issues are subscribed in full, the issued share capital of the Company as at the date of Admission would be as follows: Issued Number Nominal ( ) Ordinary Shares 22,939, ZDP Shares 31,000,

55 c108323pu050 Proof 3: _12:43 B/L Revision: 2.9 As at the Latest Practicable Date, the Company had no capital which was under option or agreed conditionally or unconditionally to be put under option. 3 Mandatory offers and squeeze-out rules 3.1 Mandatory offers The Takeover Code applies to the Company. Under the Takeover Code, if an acquisition of ordinary shares were to increase the aggregate holding of the acquirer and any parties acting in concert with it to ordinary shares carrying 30 per cent. or more of the voting rights in the Company, the acquirer and, depending on the circumstances, its concert parties (if any) would be required (except with the consent of the Panel on Takeovers and Mergers) (the Panel ) to make a cash offer for shares not already owned by the acquirer or its concert parties (if any) at a price not less than the highest price paid for shares by the acquirer or its concert parties (if any) during the previous 12 months or (where there has been no acquisition of shares of the relevant class) at a comparable price agreed by the Panel. A similar obligation to make such a mandatory cash offer would also arise on the acquisition of shares by a person holding (together with its concert parties, if any) shares carrying at least 30 per cent, but not more than 50 per cent, of the voting rights in the Company if the effect of such acquisition were to increase the percentage of the aggregate voting rights held by the acquirer and its concert parties (if any). 3.2 Squeeze-out rules The Law provides that if an offer is made for the shares or any class of shares in the capital of a company and if, within 4 months after the date of such offer, the offer is approved by shareholders comprising 90 per cent. in value of the shares affected (excluding any shares held as treasury shares) then the offeror may, within 2 months after the expiration of those 4 months, send an acquisition notice to any dissenting shareholders informing them that it wishes to acquire their shares (an Acquisition Notice ). Where an Acquisition Notice is given, the offeror is then entitled and bound to acquire those shares on the terms on which the original offer, approved by the shareholders comprising 90 per cent. in value of the shares affected, was made. 4 Memorandum and Articles of Incorporation of the Company The Memorandum of Incorporation provides that the Company s objects are unrestricted and it shall therefore have the full power and authority to carry out any object not prohibited by the Law, or any other law of Guernsey. Copies of the Memorandum of Incorporation are available for inspection at the address specified in paragraph 19 of this Part 9. The Articles of Incorporation of the Company contain provisions, inter alia, to the following effect. Copies of the Articles of Incorporation are available for inspection at the address specified in paragraph 19 of this Part Share Capital The Company may issue an unlimited number of Shares Ordinary Shares Subject to paragraph 4.22, the rights attaching to the Ordinary Shares shall be as follows: (a) As to income the holders of Ordinary Shares shall be entitled to receive, and participate in, any dividends or other distributions out of the profits of the Company attributable to the Ordinary Shares available for dividend or distribution and resolved to be distributed in respect of any accounting period or any other income or right to participate therein in accordance with paragraphs 4.8 and 4.9 inclusive. (b) As to capital the holders of Ordinary Shares shall be entitled on a winding up to participate in the distribution of capital in the manner described in paragraph 4.5. (c) As to voting the holders of the Ordinary Shares shall be entitled to receive notice of and to attend and vote at general meetings of the Company ZDP Shares The rights attaching to the ZDP Shares (as defined in the Articles) shall be as set out in paragraph

56 c108323pu050 Proof 3: _12:43 B/L Revision: General Without prejudice to any special rights previously conferred on the holders of any existing Shares or class of Shares, any Share (or option, warrant or other right in respect of a Share) in the Company may be issued with such preferred, deferred or other special rights or restrictions, whether as to dividend, voting, return of capital or otherwise, as the Board may determine. To the extent required by sections 292 and 293 of the Law, the Board is authorised to issue an unlimited number of shares (or options, warrants or other rights in respect of Shares) (subject only to any limitation in the Articles) which authority shall expire five years after the date of adoption of the Articles; in the event that the restrictions in section 292(3)(a) and/or (b)(i) of the Law are amended or removed, such authority shall be to the extent and for as long as is legally permissible. This authority may be further extended in accordance with the provisions of the Law. 4.2 Offers to shareholders to be on a pre-emptive basis (a) The Company shall not allot equity securities to a person on any terms unless: (i) (ii) it has made an offer to each person who holds equity securities of the same class in the Company to allot to him on the same or more favourable terms a proportion of those securities that is as nearly as practicable equal to the proportion in number held by him of the share capital of the Company; and the period during which any such offer may be accepted has expired or the Company has received notice of the acceptance or refusal of every offer so made. (b) (c) (d) (e) (f) Securities that the Company has offered to allot to a holder of equity securities in accordance with paragraph 4.2(a) may be allotted to him, or anyone in whose favour he has renounced his right to their allotment, without contravening the restriction referred to in paragraph 4.2(a). Shares held by the Company as treasury shares shall be disregarded for the purposes of the restriction referred to in paragraph 4.2(a), so that the Company is not treated as a person who holds shares; and the treasury shares are not treated as forming part of the share capital of the Company. Any offer required to be made by the Company pursuant to the restriction referred to in paragraph 4.2(a) should be made by a notice (given in accordance with paragraph 4.12)) and such offer must state a period during which such offer may be accepted and such offer shall not be withdrawn before the end of that period. Such period must be a period of at least 21 days beginning on the date on which such offer is deemed to be delivered or received (as the case may be), pursuant to paragraph The restriction referred to in paragraph 4.2(a) shall not apply in relation to the allotment of bonus shares, shares issued pursuant to the provisions of paragraph 4.9, or to a particular allotment of equity securities if these are, or are to be, wholly or partly paid otherwise than in cash. The Company may by special resolution resolve that the restriction referred to in paragraph 4.2(a) shall be excluded or that the restriction referred to in paragraph 4.2(a) shall apply with such modifications as may be specified in the resolution: (i) (ii) (iii) generally in relation to the allotment by the Company of equity securities; in relation to allotments of a particular description; or in relation to a specified allotment of equity securities; and any such resolution must: (i) state the maximum number of equity securities in respect of which the restriction referred to in paragraph 4.2(a) is excluded or modified; and (ii) specify the date on which such exclusion or modifications will expire, which must be not more than five years from the date on which the resolution is passed. (g) Any resolution passed pursuant to the provisions referred to in paragraph 4.2(f) may: (i) (ii) be renewed or further renewed by special resolution of the Company for a further period not exceeding five years; and be revoked or varied at any time by special resolution of the Company. 56

57 c108323pu050 Proof 3: _12:43 B/L Revision: (h) (i) Notwithstanding that any such resolution referred to in paragraphs 4.2(f) and 4.2(g) has expired, the Directors may allot equity securities in pursuance of an offer or agreement previously made by the Company if the resolution enabled the Company to make an offer or agreement that would or might require equity securities to be allotted after it expired. In relation to an offer to allot securities a reference (however expressed) to the holder of shares of any description is to whoever was the holder of shares of that description at the close of business on a date to be specified in the offer and the specified date must fall within the period of 28 days immediately before the date of the offer. 4.3 Issue of Shares Subject to the authority to issue Shares referred to in paragraph 4.1 or any extension thereof and to paragraph 4.2, the unissued Shares shall be at the disposal of the Board which may allot or grant options, warrants or other rights over or otherwise dispose of them to such persons on such terms and conditions and at such times as the Board determines but so that no Share shall be issued at a discount except in accordance with the Law and so that the amount payable on application on each Share shall be fixed by the Board. 4.4 Variation of Class Rights If at any time the share capital is divided into different classes of Shares, the rights attached to any class (unless otherwise provided by the terms of issue) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of threefourths of the issued Shares of that class or with the sanction of a special resolution of the holders of the Shares of that class. 4.5 Winding up If the Company shall be wound up, the surplus assets remaining after payment of all creditors shall, subject to the provisions of paragraph below, be divided among the shareholders in accordance with the Articles. Subject to the provisions of paragraph below, the surplus assets available for distribution among the shareholders shall be applied in payment to the holders of the Ordinary Shares. If the Company is wound up whether voluntarily or otherwise, the liquidator may, with the sanction of a special resolution divide among the shareholders in specie any part of the assets of the Company and may with the like sanction vest any part of the assets of the Company in trustees upon such trusts for the benefit of the shareholders as the liquidator with the like sanction shall think fit. If any of the securities or other assets to be divided as aforesaid involve a liability to calls or otherwise any person entitled under such division to any of the said assets may within fourteen (14) clear days after the passing of the special resolution, by notice in writing, direct the liquidator to sell his proportion and pay him the net proceeds and the liquidator shall, if practicable, act accordingly. Where the Company is proposed to be or is in the course of being wound up and the whole or part of its business or property is proposed to be transferred or sold to another company (the transferee) the liquidator of the Company may, with the sanction of an ordinary resolution, conferring either a general authority on the liquidator or an authority in respect of any particular arrangement, receive in compensation or part compensation for the transfer or sale, share policies or other like interests in the transferee for distribution among the shareholders or may enter into any other arrangement whereby any shareholder may, in lieu of receiving cash, shares, policies or other like interests, or in addition thereto, participate in the profits of or receive any other benefits from the transferee. 4.6 Disclosure of Third Party Interests in Shares The Directors shall have power by notice in writing to require any shareholder to disclose to the Company the identity of any person (other than the shareholder) who has an interest in the Shares held by the shareholder and the nature of such interest. Any such notice shall require any information in response to such notice to be given within the prescribed period which is 28 days after service of the notice or 14 days if the Shares concerned represent 0.25 per cent. or more in value of the issued Shares of the relevant class or such other 57

58 c108323pu050 Proof 3: _12:43 B/L Revision: reasonable period as the Directors may determine. The direction notice may direct that in respect of the Shares in respect of which the default has occurred (the default Shares ) and any other Shares held by the shareholder, the shareholder shall not be entitled to vote (either personally or by representative or by proxy) in general meetings or class meetings. Where the default Shares represent at least 0.25 per cent. of the class of Shares concerned the direction notice may additionally direct that dividends on such shares will be retained by the Company (without interest), and that no transfer of the Shares (other than a transfer approved under the Articles) shall be registered until the default is rectified. 4.7 Notification of interests The Articles incorporate by reference the provisions of Chapter 5 of the Disclosure and Transparency Rules (the Disclosure and Transparency Provisions ). The Disclosure and Transparency Provisions detail the circumstances in which a person may be obliged to notify the Company within four trading days that he has an interest in voting rights in respect of Ordinary Shares. An obligation to notify the Company arises when the percentage of voting rights which a person holds reaches, exceeds or falls below three per cent. of the voting rights attaching to any class of the shares or moves through any whole percentage point above three per cent. In addition, the Company may, by issuing a written notice (a Disclosure Notice ), require a shareholder to disclose the nature of his interest in a relevant shareholding within such reasonable time as may be specified in the Disclosure Notice. Where a shareholder fails to comply with the Disclosure and Transparency Provisions, the Directors may by delivery of a notice to the applicable shareholder (i) suspend the right of such shareholder to vote in person or by proxy at any meeting of the Company (until a date that is no more than seven days after the Company has determined in its sole discretion that the shareholder has cured the non-compliance with the provisions of Disclosure and Transparency Rule 5) and/or (ii) withhold, without any obligation to pay interest thereon, any dividend or other amount payable, render ineffective any election to receive Shares of the Company instead of cash in respect of any dividend or part thereof and/or prohibit the transfer of any Shares held by the shareholder except with the consent of the Company. 4.8 Dividends Subject to compliance with section 304 of the Law, the Board may at any time declare and pay such dividends as appear to be justified by the position of the Company. The Board may also declare and pay any fixed dividend which is payable on any Shares half-yearly or otherwise on fixed dates whenever the position, in the opinion of the Board, so justifies. The method of payment of dividends shall be at the discretion of the Board. No dividend shall be paid in excess of the amounts permitted by the Law or approved by the Board. Unless and to the extent that the rights attached to any Shares or the terms of issue thereof otherwise provide, all dividends shall be declared and paid pro rata according to the number of Shares held by each shareholder. For the avoidance of doubt, where there is more than one class of Shares in issue, dividends declared in respect of any class of Share shall be declared and paid pro rata according to the number of Shares of the relevant class held by each shareholder. The Board may deduct from any dividend payable to any shareholder on or in respect of a Share all sums of money (if any) presently payable by him to the Company on account of calls or otherwise. The Board may retain any dividend or other monies payable on or in respect of a Share on which the Company has a lien and may apply the same in or towards satisfaction of the liabilities or obligations in respect of which the lien exists. The Board may retain dividends payable upon Shares in respect of which any person is entitled to become a shareholder until such person has become a shareholder. With the sanction of the Company in general meeting by way of a special resolution, any dividend may be paid wholly or in part by the distribution of specific assets and, in particular, of paid-up Shares of the Company. Where any difficulty arises in regard to such distribution the Board may settle the same as it thinks expedient and in particular may issue fractional 58

59 c108323pu050 Proof 3: _12:43 B/L Revision: Shares and fix the value for distribution of such specific assets and may determine that cash payments shall be made to any shareholders upon the footing of the value so fixed in order to adjust the rights of shareholders and may vest any such specific assets in trustees for the shareholders entitled as may seem expedient to the Board. Any dividend interest or other monies payable in cash in respect of Shares may be paid by cheque or warrant sent through the post to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holders who is first named on the register. Any one of two or more joint holders may give effectual receipts for any dividends interest or other monies payable in respect of their joint holdings. In addition, any such dividend or other sum may be paid by any bank or other funds transfer system or such other means (including, in relation to any dividend or other sum payable in respect of Shares held in uncertificated form, by means of a computer-based system and procedures such as CREST in any manner permitted by the rules of the relevant system concerned) and to or through such person as the holder or joint holders (as the case may be) may in writing direct, and the Company shall have no responsibility for any sums lost or delayed in the course of any such transfer or where it has acted on any such directions. Any one of two or more joint holders may give effectual receipts for any dividends interest bonuses or other monies payable in respect of their joint holdings. No dividend or other monies payable on or in respect of a Share shall bear interest against the Company. All unclaimed dividends may be invested or otherwise made use of by the Board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends unclaimed for a period of six years after having been declared shall be forfeited and shall revert to the Company. 4.9 Scrip Dividends The Board may, if authorised by an ordinary resolution of the Company, offer any holders of any particular class of Shares (excluding treasury shares) the right to elect to receive further Shares (whether or not of that class), credited as fully paid, instead of cash in respect of all or part of any dividend specified by the ordinary resolution (a Scrip Dividend ) in accordance with the following provisions. The ordinary resolution may specify a particular dividend (whether or not already declared) or may specify all or any dividends declared within a specified period, but such period may not end later than the conclusion of the fifth annual general meeting of the Company to be held following the date of the meeting at which the ordinary resolution is passed. The basis of allotment shall be decided by the Board so that, as nearly as may be considered convenient, the value of the further Shares, including any fractional entitlement, is equal to the amount of the cash dividend which would otherwise have been paid. For the purposes of the above the value of the further Shares shall be calculated by reference to the average of the middle market quotations for a fully paid Share of the relevant class, as shown in the Official List for the day on which such Shares are first quoted ex the relevant dividend and the four subsequent dealing days, or in such other manner as the Directors may decide. The Board shall give notice to the shareholders of their rights of election in respect of the Scrip Dividend and shall specify the procedure to be followed in order to make an election. The dividend or that part of it in respect of which an election for the Scrip Dividend is made shall not be paid and instead further Shares of the relevant class shall be allotted in accordance with elections duly made and the Board shall capitalise a sum to the aggregate nominal amount of the Shares to be allotted out of such sums available for the purpose as the Directors may consider appropriate. The further Shares so allotted shall rank pari passu in all respects with the fully paid Shares of the same class then in issue except as regards participation in the relevant dividend. The Board may decide that the right to elect for any Scrip Dividend shall not be made available to shareholders resident in any territory where, in the opinion of the Board, compliance with local laws or regulations would be impossible or unduly onerous. 59

60 c108323pu050 Proof 3: _12:43 B/L Revision: The Board may do all acts and things considered necessary or expedient to give effect to the provisions of a Scrip Dividend election and the issue of any Shares in accordance with the provisions described in this paragraph and the Law, and may make such provisions as they think fit in the case of Shares becoming distributable in fractions (including provisions under which, in whole or in part, the benefit of the fractional entitlements accrues to the Company rather than to the shareholders concerned). The Board may from time to time establish or vary a procedure for election mandates, under which a shareholder may, in respect of any future dividends for which a right of election pursuant to this paragraph is offered, elect to receive Shares in lieu of such dividend on the terms of such mandate. The Board shall not make a Scrip Dividend available unless the Company has sufficient unissued shares and undistributed profits or reserves to give effect to elections which could be made to receive that Scrip Dividend. For the avoidance of doubt, Shares allotted pursuant to paragraph 4.9 in respect of all or part of any dividend shall not be treated as allotted for cash for the purposes of paragraph Transfer of Shares The Articles are subject to, and do not limit or restrict the Company s powers to transfer shares in accordance with the Uncertificated Securities (Enabling Provisions) (Guernsey) Law, 2005 and any legislation or rules enacted in respect of it. The Articles provide that the Directors may implement such arrangements as they may, in their absolute discretion, think fit in order for any class of shares to be admitted to settlement by means of the CREST system. If the Directors implement any such arrangements, no provision of the Articles shall apply or have effect to the extent that it is in any respect inconsistent with: (a) the holding of Shares of that class in uncertificated form; (b) the transfer of title to Shares of that class by means of the CREST system; or (c) the CREST Guernsey Requirements. Where any class of Shares is, for the time being, admitted to settlement by means of the CREST system such securities may be issued in uncertificated form in accordance with and subject as provided in the CREST Guernsey Requirements. Unless the Directors otherwise determine, such securities held by the same holder or joint holders in certificated form and uncertificated form shall be treated as separate holdings. Such securities may be changed from uncertificated to certificated form, and from certificated to uncertificated form, in accordance with and subject as provided in the CREST Guernsey Requirements. Title to such of the Shares as are recorded on the register as being held in uncertificated form may be transferred only by means of the CREST system and as provided in the CREST Guernsey Requirements. Every transfer of Shares from a CREST account of a CREST member to a CREST account of another CREST member shall vest in the transferee a beneficial interest in the Shares transferred, notwithstanding any agreements or arrangements to the contrary, however and whenever arising and however expressed. Subject to such of the restrictions of the Articles, any shareholder may transfer all or any of their certificated Shares by an instrument of transfer in any usual form or in any other form which the Directors may approve. The instrument of transfer of a Share shall be signed by or on behalf of the transferor and, unless the Share is fully paid, by or on behalf of the transferee. The Board may, in its absolute discretion and without giving a reason, refuse to register a transfer of any Share in certificated form or uncertificated form which is not fully paid up or on which the Company has a lien provided that this would not prevent dealings from taking place on an open and proper basis. The Directors may also refuse to register any transfer of Shares which is prohibited by the provisions described above, or any transfer of Shares unless such transfer is in respect of only one class of Shares, it is in favour of a Permitted Transferee (as defined in the Articles), it is in favour of a single transferee or no more than 60

61 c108323pu050 Proof 3: _12:43 B/L Revision: four joint transferees, is delivered for registration to the Company s registered office or such other place as the Board may decide, and is accompanied by the relevant share certificate(s) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer. Subject to any relevant restrictions of the Articles, any shareholder may transfer all or any of their uncertificated Shares by means of a relevant system authorised by the Directors in such manner provided for, and subject as provided in any regulations issued for this purpose under the Law or as may otherwise from time to time be adopted by the Directors on behalf of the Company and the rules of any relevant system, and accordingly no provision of the Articles shall apply in respect of an uncertificated Share to the extent that it requires or contemplates the effecting of a transfer by an instrument in writing or the production of a certificate for the Shares to be transferred. Subject to the provisions of the CREST Guernsey Requirements, the registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine, provided that such suspension shall not be for more than 30 days in any year Alteration of capital and purchase of shares The Company may by ordinary resolution: consolidate and divide all or any of its share capital into shares of larger or smaller amounts than its existing Shares; subdivide all or any of its Shares into shares of a smaller amount subject to the paragraph below; cancel Shares which, at the date of the passing of the resolution, have not been taken up or agreed to be taken up by any person, and diminish the amount of its share capital by the amount of Shares so cancelled; convert all or any of its Shares, the nominal amount of which is expressed in a particular currency or former currency into Shares of a nominal amount of a different currency, the conversion being effected at the rate of exchange (calculated to not less than three significant figures) current on the date of the resolution or on such other day as may be specified therein; or where its share capital is expressed in a particular currency or former currency, denominate or redenominate it, whether by expressing its amount in units or subdivisions of that currency or former currency, or otherwise. In any subdivision under the paragraph above the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall be the same as that proportion in the case of the Share from which the reduced Share was derived. The Company may reduce its share capital, any capital account or any share premium account in any manner and with and subject to any authorisation or consent required by the Law. The Company may, at the discretion of the Board, purchase any of its own Shares, whether or not they are redeemable, and may pay the purchase price in respect of such purchase to the fullest extent permitted by the Law Notices A notice or other communication may be given by the Company to any shareholder either personally or by sending it by prepaid post addressed to such shareholder at his registered address (or, subject to below, in electronic form) or if he desires that notices shall be sent to some other address or person to the address or person nominated for such purpose. Any notice or other document, if served by post (including registered post, recorded delivery service or ordinary letter post), shall be deemed to have been served 48 hours after the time when the letter containing the same is posted and in proving such service it shall be sufficient to prove that the letter containing the notice or document was properly posted. Any notice or other document that may be sent by the Company by courier will be deemed to be received 24 hours after the time at which it was despatched. Service of a document sent by post shall be proved by showing the date of posting, the address thereon and the fact of pre-payment. Any notice or other document, if transmitted by electronic communication, facsimile transmission or other similar means which produces or enables the production of a document containing the text of the communication, shall, if so transmitted, be deemed to be received at the expiration of 24 hours after the time it was sent. 61

62 c108323pu050 Proof 3: _12:43 B/L Revision: A notice may be given by the Company to the joint holders of a Share by giving the notice to the joint holder first named in the register in respect of the Share. Any notice or other communication sent to the address of any shareholder shall, notwithstanding the death, disability or insolvency of such shareholder and whether the Company has notice thereof, be deemed to have been duly served in respect of any Share registered in the name of such shareholder as sole or joint holder and such service shall, for all purposes, be deemed a sufficient service of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in any such Share. All shareholders shall be deemed to have agreed to accept communication from the Company by electronic means in accordance with sections 524 and 526 and schedule 3 of the Law unless a shareholder notifies the Company otherwise. Such notification must be in writing and signed by the shareholder and delivered to the Company s registered office or such other place as the Board directs. A shareholder shall be entitled to require the Company to send him a version of a document or information in hard copy form Notice of general meetings A general meeting of the Company (other than an adjourned meeting) must be called by notice of at least 14 clear days. A general meeting may be called by shorter notice than otherwise required if all the shareholders entitled to attend and vote so agree. Notices and other documents may be sent in electronic form or published on a website in accordance with section 208 of the Law. Notice of a general meeting of the Company must be sent to every shareholder (being only persons registered as a shareholder), every Director and every alternate Director registered as such. Notice of a general meeting of the Company must state the time and date of the meeting, state the place of the meeting, specify any special business to be put to the meeting (as defined in the Articles), contain the information required under section 178(6)(a) of the Law in respect of a resolution which is to be proposed as a special resolution at the meeting, contain the information required under section 179(6)(a) of the Law in respect of a resolution which is to be proposed as a waiver resolution at the meeting, and contain the information required under section 180(3)(a) of the Law in respect of a resolution which is to be proposed as a unanimous resolution at the meeting. Notice of a general meeting must state the general nature of the business to be dealt with at the meeting. The accidental omission to give notice of any meeting to or the non-receipt of such notice by any shareholder shall not invalidate any resolution or any proposed resolution otherwise duly approved General meetings The first general meeting of the Company shall be held within eighteen (18) months of the date of incorporation as required by the Law and thereafter general meetings shall be held once at least in each subsequent calendar year in accordance with Section 199 of the Law but so that not more than fifteen (15) months may elapse between one annual general meeting and the next. At each such annual general meeting shall be laid copies of the Company s most recent accounts, Directors report and, if applicable, the auditor s report in accordance with Section 252 of the Law. The requirement for an annual general meeting may be waived by the shareholders in accordance with Section 201 of the Law. Other meetings of the Company shall be called extraordinary general meetings. All general meetings shall be held in Guernsey. A shareholder participating by video link or telephone conference call or other electronic or telephonic means of communication in a meeting at which a quorum is present shall be treated as having attended that meeting provided that the shareholders present at the meeting can hear and speak to the participating shareholder. 62

63 c108323pu050 Proof 3: _12:43 B/L Revision: A video link or telephone conference call or other electronic or telephonic means of communication in which a quorum of shareholders participates and all participants can hear and speak to each other shall be a valid meeting which shall be deemed to take place where the Chairman is present unless the shareholders resolve otherwise. Any general meeting convened by the Board, unless its time shall have been fixed by the Company in general meeting or unless convened in pursuance of a requisition, may be postponed by the Board by notice in writing and the meeting shall, subject to any further postponement or adjournment, be held at the postponed date for the purpose of transacting the business covered by the original notice. The Board may, whenever it thinks fit, and shall on the requisition of shareholders who hold more than ten per cent. (10%) of such of the capital of the Company as carries the right to vote at general meetings (excluding any capital held as treasury shares) in accordance with Sections 203 and 204 of the Law proceed to convene a general meeting Conflicts of interest A Director must, immediately after becoming aware of the fact that he is interested in a transaction or proposed transaction with the Company, disclose to the Board in accordance with section 162 of the Law: (a) (b) if the monetary value of the Director s interest is quantifiable, the nature and monetary value of that interest; or if the monetary value of the Director s interest is not quantifiable, the nature and extent of that interest. The obligation referred to above does not apply if: (a) (b) the transaction or proposed transaction is between the Director and the Company; and the transaction or proposed transaction is or is to be entered into in the ordinary course of the Company s business and on usual terms and conditions. A general disclosure to the Board to the effect that a Director has an interest (as director, officer, employee, member or otherwise) in a party and is to be regarded as interested in any transaction which may after the date of the disclosure be entered into with that party is sufficient disclosure of interest in relation to that transaction. Nothing referred to in the paragraph above applies in relation to: (a) (b) (c) remuneration or other benefit given to a Director; insurance purchased or maintained for a Director in accordance with section 158 of the Law; or a qualifying third party indemnity provision provided for a Director in accordance with section 159 of the Law. Subject to the paragraph below, a Director is interested in a transaction to which the Company is a party if such Director: (a) (b) (c) (d) (e) is a party to, or may derive a material benefit from, the transaction; has a material financial interest in another party to the transaction; is a director, officer, employee or member of another party (other than a party which is an associated company) who may derive a material financial benefit from the transaction; is the parent, child or spouse of another party who may derive a material financial benefit from the transaction; or is otherwise directly or indirectly materially interested in the transaction. A Director is not interested in a transaction to which the Company is a party if the transaction comprises only the giving by the Company of security to a third party which has no connection with the Director, at the request of the third party, in respect of a debt or obligation of the Company for which the Director or another person has personally assumed responsibility in whole or in part under a guarantee, indemnity or security. 63

64 c108323pu050 Proof 3: _12:43 B/L Revision: Save as provided in the Articles, a Director shall not vote in respect of any contract or arrangement or any other proposal whatsoever in which he has any material interest otherwise than by virtue of his interest in Shares or debentures or other securities of or otherwise through the Company. A Director may be counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting. A Director shall (in the absence of some other material interest than is indicated below) be entitled to vote (and be counted in the quorum) in respect of any resolution concerning any of the following matters namely: (a) the giving of any guarantee, security or indemnity to him in respect of money lent or obligations incurred by him at the request of or for the benefit of the Company or any of its subsidiaries; (b) (c) (d) the giving of any guarantee, security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which he himself has assumed responsibility in whole or in part 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 subsidiaries for subscription or purchase in which offer he is or is to be interested as a participant in the underwriting or sub-underwriting thereof; any proposal concerning any other company in which he is interested, directly or indirectly and whether as an officer or shareholder or otherwise howsoever, provided that he is not the holder of or beneficially interested in one per cent. or more of the issued shares of such company (or of any third company through which his interest is derived) or of the voting rights available to shareholders of the relevant company (any such interest being deemed for these purposes to be a material interest in all circumstances). Where proposals are under consideration concerning the appointment (including fixing or varying the terms of appointment) of two or more Directors to offices or employment with the Company or any company in which the Company is interested the Directors may be counted in the quorum for the consideration of such proposals and such proposals may be divided and considered in relation to each Director separately and in such case each of the Directors concerned (if not debarred from voting under the provisions referred to above) shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that concerning his own appointment. If any question shall arise at any meeting as to the materiality of a Director s interest or as to the entitlement of any Director to vote and such question is not resolved by his voluntarily agreeing to abstain from voting, such question shall be referred to the chairman of the meeting and his ruling in relation to any other Director shall be final and conclusive except in a case where the nature or extent of the interests of the Director concerned have not been fairly disclosed. The Company may by ordinary resolution suspend or relax the provisions referred to above to any extent or ratify any transaction not duly authorised by reason of a contravention of any of the paragraphs above. Subject to the provisions referred to above the Directors may exercise the voting power conferred by the shares in any other company held or owned by the Company or exercisable by them as directors of such other company in such manner in all respects as they think fit (including the exercise thereof in favour of any resolution appointing themselves or any of them director, managing director, managers or other officer of such company or voting or providing for the payment or remuneration to the directors, managing director, manager or other officer of such company). A Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his office of Director on such terms as to tenure of office or otherwise as the Directors may determine. Subject to due disclosure in accordance with the provisions referred to in this paragraph 4.15, no Director or intending Director shall be disqualified by his office from contracting with the Company as vendor, purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director is in any way 64

65 c108323pu050 Proof 3: _12:43 B/L Revision: interested render the Director liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relationship thereby established. Any Director may act by himself or his firm in a professional capacity for the Company and he or his firm shall be entitled to remuneration for professional services as if he were not a Director provided that nothing herein contained shall authorise a Director or his firm to act as Auditor to the Company. Any Director may continue to be or become a director, managing director, manager or other officer or member of any company in which the Company may be interested and (unless otherwise agreed) no such Director shall be accountable for any remuneration or other benefits received by him as a director, managing director, manager or other officer or member of any such other company Remuneration and appointment of Directors The ordinary remuneration of the Directors who do not hold executive office for their services (excluding amounts payable under any other sub-paragraph of the Articles) shall not exceed in aggregate 100,000 per annum or such higher amount as the Company may from time to time by ordinary resolution determine. Such remuneration shall be deemed to accrue from day to day. The Directors shall also be paid all reasonable out-of-pocket travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or general meetings of the Company or in connection with the business of the Company. In addition, the Board may award additional remuneration to any Director engaged in exceptional work at the request of the Board on a time spent basis. The Board shall have power at any time to appoint any person eligible in accordance with section 137 of the Law to be a Director either to fill a casual vacancy or as an addition to the existing Directors but so that the total number of Directors shall not at any time exceed the number, if any, fixed pursuant to these Articles. Any Director so appointed shall hold office only until the next following annual general meeting and shall then be eligible for re-election. Without prejudice to the powers of the Board, the Company in general meeting may appoint any person to be a Director either to fill a casual vacancy or as an additional Director. The Directors may at any time appoint one or more of their body (other than a Director resident in the United Kingdom) to the office of managing director for such term and at such remuneration and upon such terms as they determine Disqualification and retirement of Directors No person other than a Director retiring at a general meeting shall, unless recommended by the Directors, be eligible for election by the Company to the office of Director unless, not less than 14 clear days before the date appointed for the meeting there shall have been left at the Company s registered office notice in writing signed by a shareholder duly qualified to attend and vote at the meeting for which such notice is given of his intention to propose such person for election together with notice in writing signed by that person of his willingness to be elected. A Director shall cease to hold office: (i) if the Director (not being a person holding for a fixed term an executive office subject to termination if he ceases for any reason to be a Director) resigns his office by written notice signed by him sent to or deposited at the registered office of the Company, (ii) if he shall have absented himself from meetings of the Board for a consecutive period of 12 months and the Board resolves that his office shall be vacated, (iii) if he dies or becomes of unsound mind or incapable, (iv) if he becomes insolvent, suspends payment or compounds with his creditors, (v) if he is requested to resign by written notice signed by all his co-directors, (vi) if the Company in general meeting shall declare that he shall cease to be a Director, (vii) if he becomes resident in the United Kingdom and, as a result thereof, a majority of the Directors are resident in the United Kingdom, (viii) if he becomes ineligible to be a Director in accordance with section 137 of the Law or (ix) if he becomes prohibited from being a Director by reason of any order made under any provisions or any law or enactment. 65

66 c108323pu050 Proof 3: _12:43 B/L Revision: The continuing Directors may act notwithstanding any vacancy but, if and so long as their number is reduced below the minimum number fixed pursuant to these Articles, the continuing Directors may act for the purpose of increasing the number of Directors to that number or of summoning a general meeting but for no other purpose. If there be no Directors able or willing to act, then any Member may summon a general meeting for the purpose of appointing Directors Indemnities The Directors, company secretary and officers for the time being of the Company and their respective heirs and executors shall, to the extent permitted by section 157 of the Law, be fully indemnified out of the assets and profits of the Company from and against all actions, expenses and liabilities which they or their respective heirs or executors may incur by reason of any contract entered into or any act in or about the execution of their respective offices or trusts except such (if any) as they shall incur by or through their own negligence, default, breach of duty or breach of trust respectively and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipt for the sake of conformity or for any bankers or other person with whom any monies or assets of the Company may be lodged or deposited for safe custody or for any bankers or other persons into whose hands any money or assets of the Company may come or for any defects of title of the Company to any property purchased or for insufficiency or deficiency of or defect in title of the Company to any security upon which any monies of the Company shall be placed out or invested or for any loss, misfortune or damage resulting from any such cause as aforesaid or which may happen in or about the execution of their respective offices or trusts, except if the same shall happen by or through their own negligence, default, breach of duty or breach of trust Borrowing powers The Board may exercise all the powers of the Company to borrow money (in whatever currency the Board determines from time to time) and mortgage, hypothecate, pledge or charge all or part of its undertaking, property and uncalled capital and to issue debentures and other securities whether outright or as collateral security for any liability or obligation of the Company or of any third party Duration If the Company has not then been liquidated, unitised, reorganised or reconstructed, at the annual general meeting in 2011 and at each fifth annual general meeting of the Company convened by the Board thereafter, the Board shall propose a special resolution that the Company shall cease to continue as presently constituted. If any such special resolution is passed, the Board shall draw up proposals for the unitisation, reorganisation or reconstruction of the Company and in the alternative the voluntary liquidation of the Company for submission to the Members at a general meeting to be convened by the Board for a date not more than three months after the date of the meeting at which such special resolution was passed Forfeiture and surrender of Shares Any Share in respect of which a notice requiring payment of an unpaid call or instalment, together with any interest which may have accrued and any expenses which may have been incurred, has been served may, at any time before payment has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited Share and not actually paid before the forfeiture. The Directors may, in their absolute discretion, refuse to register a transfer of any Shares to a person that they have reason to believe is (i) an employee benefit plan (within the meaning of Section 3(3) of ERISA) that is subject to Part 4 of Title 1 of ERISA, (ii) a plan, individual retirement account or other arrangement that is subject to Section 4975 of the US Internal Revenue Code or any other state, local laws or regulations that would have the same effect as regulations promulgated under ERISA by the US Department of Labor and codified at 29 C.F.R. Section to cause the underlying assets of the Company to be treated as assets of that investing entity by virtue of its investment (or any beneficial interest) in the Company and thereby subject the Company and the Investment Manager (or other persons responsible for the investment and operation of the Company s assets) to laws or regulations 66

67 c108323pu050 Proof 3: _12:43 B/L Revision: that are similar to the fiduciary responsibility or prohibited transaction provisions contained in Title I of ERISA or Section 4975 of the US Internal Revenue Code, (iii) an entity whose underlying assets are considered to include plan assets of any such plan, account or arrangement (each of (i), (ii) and (iii), a in this paragraph 4.21 a Plan ) or (iv) any person in circumstances where the holding of Shares by such person would (a) give rise to an obligation on the Company to register as an investment company under the Investment Company Act, (b) preclude the Company from relying on the exception to the definition of investment company contained in Section 3(c)(7) of the Investment Company Act, (c) give rise to an obligation on the Company to register its Shares under the Exchange Act, (d) result in the Company not being considered a Foreign Private Issuer as that term is defined by Rule 3b-4(c) promulgated under the Exchange Act or (e) give rise to an obligation on the Investment Manager to register as a commodity pool operator or commodity trading advisor under the US Commodity Exchange Act of 1974, as amended (each such person in this paragraph 4.21 a Prohibited US Person ). Each person acquiring Shares shall by virtue of such acquisition be deemed to have represented to the Company that they are not a Prohibited US Person. If any Shares are owned directly or beneficially by a person believed by the Directors to be a Prohibited US Person, the Directors may give notice to such person requiring them either (i) to provide the Directors within 30 days of receipt of such notice with sufficient satisfactory documentary evidence to satisfy the Directors that such person is not a Prohibited US Person or (ii) to sell or transfer their Shares to a person qualified to own the same within 30 days and within such 30 days to provide the Directors with satisfactory evidence of such sale or transfer. Where condition (i) or (ii) is not satisfied within 30 days after the serving of the notice, the person will be deemed, upon the expiration of such 30 days, to have forfeited their Shares Rights attaching to ZDP Shares Rights as to dividends: The ZDP Shares carry no rights to receive dividends out of the revenue or any other profits of the Company Rights as to capital: The assets of the Company available for distribution to shareholders after payment of all of the Company s liabilities in full will be applied as follows (and in each case distributed among the holders of Shares of each class rateably according to amounts paid up on such Shares held by them): (a) (b) (c) first, any undistributed income of the Company standing to the credit of the Company s accounting revenue reserves (including any current year and accumulated revenue reserve) shall be paid to the holders of Ordinary Shares in proportion to their holdings to the extent that such undistributed income standing to the credit of the Company is attributable to the Shares held by them; second, there shall be paid to the holders of the ZDP Shares an amount equal to 100 pence per ZDP Share as increased each day from 21 December 2011 up to and including 31 January 2017 at the daily compound rate which results in a final entitlement of 138 pence on 31 January 2017; and third, subject to the terms of the Articles, there shall be paid to the holders of Ordinary Shares in proportion to their holdings the surplus assets of the Company available for distribution Rights as to voting: (1)(a) The holders of the ZDP Shares shall have the right to receive notice of general meetings of the Company but shall not have the right to attend or vote at any general meeting of the Company unless the business of the meeting includes any resolution to vary, modify or abrogate any of the special rights attached to the ZDP Shares and at any meeting where any such business is to be considered such holders shall be entitled to vote in relation to such business alone; and 67

68 c108323pu050 Proof 3: _12:43 B/L Revision: (1)(b) where by virtue of the provisions of paragraph (1)(a) above the holders of the ZDP Shares are entitled to vote, every such holder present in person or by a duly authorised representative (if a corporation) at a meeting shall, in relation to such business, have one vote in respect of every ZDP Share held by him; (2)(a) subject to paragraphs (2)(b) and (2)(c) below, the Company shall not without the previous sanction of a resolution of the holders of the ZDP Shares passed at a separate general meeting of such holders convened and held in accordance with the provisions of the Articles: (i) issue further shares or securities, or rights to subscribe for or to convert or exchange any securities into shares or securities or reclassify issued share capital into shares of a particular class where such shares would on issue, conversion, exchange or reclassification rank as to capital in priority to or pari passu with the ZDP Shares; (ii) without prejudice to the provisions of paragraph (2)(a)(i) above, issue further shares or securities, or rights to subscribe for or to convert or exchange any securities into shares or securities or reclassify issued share capital into shares of a particular class save that there may be issued at any time shares, securities or rights to subscribe for or to convert or exchange into shares, and shares may be reclassified as such other shares, provided that, in either case, (i) the Cover Test is satisfied; or (b) Cover is otherwise increased as a result of and upon such issue or reclassification; (iii) pass a resolution releasing the Directors from their obligation to redeem the ZDP Shares on the ZDP Repayment Date in accordance with paragraph below; (iv) other than the redemption of the ZDP Shares provided for in paragraph below, pass a resolution to reduce the capital of the Company in any manner, including any resolution authorising the Directors to purchase Shares save that the Company may without such sanction take authority to make, and effect purchases of its own Shares provided that, in any event, (a) the Cover Test would be met immediately following any such purchase; or (b) Cover is otherwise increased immediately following any such purchase; (v) incur any bank borrowings (excluding monies borrowed for temporary purposes only and in the ordinary course of business including, without limitation, for the purpose of settling transactions and any monies borrowed for the purpose of paying the Final Capital Entitlement or then accrued entitlement of the ZDP Shares); (vi) other than the redemption of the ZDP Shares provided for in paragraph below, pass any resolution which authorises the Directors to pay a dividend or other distribution out of the capital reserves of the Company as recorded in the Company s accounts provided that the Company may, without such sanction, make a purchase of Shares permitted under paragraph (2)(a)(iv) above; (vii) make any material change to the Company s investment policy which, at the time of making such change, appears likely in the reasonable opinion of the Directors to be materially prejudicial to the holders of the ZDP Shares; (viii) make any material change to the basis on which the Company charges expenses to its revenue and capital accounts; or (ix) pass any resolution to vary, modify or abrogate any of the special rights attached to the ZDP Shares. For the purpose of this paragraph (2)(a), the Cover Test is that the Directors shall have calculated that, in their opinion, were the actions detailed in paragraphs (2)(a)(ii) or (iv) above (each an Action ) to take place on the date specified by the Directors for such calculation (the Calculation Date ) those ZDP Shares in issue immediately thereafter would have Cover of not less than 1.85 times. For the purpose of this paragraph (2)(a), the Cover on the ZDP Shares shall represent a fraction where the numerator is equal to the 68

69 c108323pu050 Proof 3: _12:43 B/L Revision: gross assets of the Company less current liabilities and accrued charges (other than debt and liabilities to ZDP Shareholders) as at the Calculation Date, less the amount standing to the credit of the Company s revenue reserves as at the date of the Company s most recently published balance sheet, as determined by the Directors in their absolute discretion and reviewed by such persons as the Directors may (but shall not be obliged to) nominate and the denominator is equal to the aggregate amount which would be paid to the holders of the ZDP Shares in issue on the Calculation Date as a class (and on all shares ranking as to capital in priority thereto or pari passu therewith) on the ZDP Repayment Date, plus the Company s borrowings (if any), plus the cumulative management fees to be charged to capital over the period from the Calculation Date to the ZDP Repayment Date (such fees to be calculated on the basis that there is no change in value in the Company s assets between the Calculation Date and the ZDP Repayment Date). In calculating such Cover, the Directors shall: (A) (B) (C) (D) (E) (2)(b) use the portfolio valuations underlying the net assets value figure published by the Company at the end of the immediately preceding month (or on such other date as the Board in its absolute discretion may determine); assume that the Action had been undertaken at the end of the month prior to the Calculation Date (or on such other date as the Board in its absolute discretion may determine); adjust the aggregate net assets at the end of the said month (or on such other date as the Board in its absolute discretion may determine) by adding the minimum net consideration (if any) which would be received upon such Action and by deducting any consideration payable on such Action; aggregate the capital entitlements of the existing ZDP Shares and the capital entitlements of any new ZDP Shares to be issued or reclassified as aforesaid, in each case as at the Calculation Date; and make such other adjustments as they in their absolute discretion consider appropriate. notwithstanding paragraphs (i) and (2)(a) above, if any offer is made (whether by the Company or any other person, including proposals for a reduction or cancellation of capital, capitalisation issue, share purchase or repurchase and/or redemption of shares of the relevant class or any shares issued in substitution therefor) to all the holders of ZDP Shares, (other than the offeror and/or persons acting in concert with the offeror) which becomes or is declared unconditional in all respects (or would so become or be declared subject only to the passing of any Recommended Resolution (as defined below)) prior to 31 January 2017, and which enables the holders of the ZDP Shares to receive no later than 31 January 2017 an amount in cash not less than that to which the Directors estimate (so far as practicable at the time and on the basis of such assumptions as they may reasonably deem appropriate) that the ZDP shareholders would otherwise have been entitled on a redemption of their ZDP Shares or on a winding-up of the Company in each case on 31 January 2017 (whether or not such offer is accepted in any particular case and ignoring any option to receive alternative consideration) and such offer is recommended by the Directors and stated to be, in the opinion of a financial adviser appointed by the Directors, fair and reasonable the provisions of paragraph (2)(d) below shall apply to the holders of ZDP Shares in relation to any resolution or resolutions (a Recommended Resolution ) proposed at any general meeting of the Company or at any separate meeting of the holders of ZDP Shares save that the provisions of paragraph (2)(d) below shall cease as regards such shareholders if either the Directors consider that the aforementioned offer is unlikely to be honoured or the offeror breaches a material term of the offer or otherwise manifests an intention not to implement the offer; 69

70 c108323pu050 Proof 3: _12:43 B/L Revision: (2)(c) notwithstanding paragraphs (i) and (2)(a) above, if at any time on or before 31 January 2017 a resolution (a Reconstruction Resolution ) is proposed at any general meeting of the Company or at any separate meeting of any class(es) of shareholders to sanction any proposals for a reduction or cancellation of capital, capitalisation issue, share purchase or repurchase and/or redemption of any shares (including, without limitation, any further resolutions which the Directors consider to be necessary or desirable for the purposes of effecting such proposals) and which enables the holders of the ZDP Shares to receive, no later than 31 January 2017, an amount in cash not less than that to which the Directors estimate (so far as practicable at the time and on the basis of such assumptions as they may reasonably deem appropriate) that the ZDP Shareholders would otherwise have been entitled on a redemption of their ZDP Shares or on a winding-up of the Company in each case on 31 January 2017 then (ignoring any option to receive their entitlements otherwise than in cash) provided such proposals are recommended by the Directors and stated to be, in the opinion of a financial adviser appointed by the Directors, fair and reasonable, the provisions of paragraph (2)(d) below shall apply to the holders of the ZDP Shares in relation to such resolution(s) save that such provisions shall cease as regards such shareholders if the arrangement is not implemented in accordance with its terms; and (2)(d) where this paragraph (2)(d) applies in respect of any resolution the ZDP Shareholders shall not be entitled to vote at any general meeting of the Company and the previous sanction of a special resolution of the ZDP Shareholders shall not be required in any case provided that where, notwithstanding the foregoing, such sanction is required in any case by Law, all ZDP Shareholders present in person, by representative (if a corporation) or by proxy and entitled to vote at such meeting shall (in respect of the votes attached to all such shares) vote in favour of the resolution or resolutions recommended by the Directors and where any vote is not cast or is cast against any such resolution or resolutions recommended by the Directors it shall be deemed to have been cast in favour. The vote on any Recommended Resolution or Reconstruction Resolution shall be taken on a poll Rights as to redemption: Unless the Directors have previously been released from their obligations to do so by a special resolution of the Company (such special resolution having been duly passed not earlier than 31 December 2016 and having been sanctioned by necessary class approval), the Company shall on the ZDP Repayment Date, compulsorily redeem all ZDP Shares in issue at an amount equal to the Final Capital Entitlement per ZDP Share or, if lower, the surplus assets of the Company available for the purpose prorata to each ZDP Shareholder s holding of ZDP Shares, and for the avoidance of doubt surplus assets available for the purpose shall exclude the revenue profits (including accumulated revenue reserves) of the Company. 70

71 c108323pu050 Proof 3: _12:43 B/L Revision: 5 Directors 5.1 In addition to their directorship of the Company, the Directors hold or have held the following directorships and are or were members of the following partnerships, within the past five years: Name Current directorships/partnerships Previous directorships/partnerships Helen Green Advance Frontier Markets Fund Limited Anna Corporation Arrow Administration (Guernsey) Limited Astraeus Property Limited Attard Limited Balaga Limited Barba Family Company Limited Barba Property Limited Burnham Properties Limited Champness Limited Clarinda UK Limited Coleshill Limited Corbiere Trust Company Limited Davos Trust Company Limited Eythrope Trustee Co. Limited GAMX Limited Garthewin Limited Greenwich Limited GB Partnership Investment Associates Inc Goshawk Trust Company Limited Hardcastle Investments Limited Hector Limited Henderson Diversified Income (Luxembourg) Sàrl Henderson Diversified Income Limited HPFM (Guernsey) Limited Icarsan Limited J Rothschild Group (Guernsey) Limited J Rothschild Investments 1 Limited J Rothschild Nominees (Guernsey) Limited Jameson Services (Jersey) Limited Juromant Investments Limited Kasomitra Holdings Limited Kerasia Property Limited Klosters Trust Company Limited Lakestar (G.P.) Limited Landore Resources Limited Lewdown Holdings Limited Lions Hill Limited (in receivership) Mica Enterprises Limited SA Millbank Properties Limited Narlin Limited Octavian Nominees Limited Palmus Trust Company Limited Puma Sphera Puma Sphera Management (Cayman) Limited Puma Sphera Master Fund Rysaffe Actionnaires Sàrl Rysaffe Administrators Sàrl Rysaffe Fiduciaries Sàrl Rysaffe International Services Limited Rysaffe Nominees (C.I.) Limited Rysaffe Secretaries Sàrl Rysaffe Trustee Company (C.I.) Limited Saffery Champness Fund Services Limited Saffery Champness Holdings Limited Saffery Champness Management International Limited Advance AIM Value Realisation Company Limited* Alicante Services Limited* Astraeus Limited S.A. Auriga Nominees Limited Barba Family Foundation Company Ltd. S.A Bayit Residential Investments Limited Bovingdon Properties Unlimited Brandenburg Archie 15 Acquico 1 Sàrl Brandenburg Archie 15 Acquico 2 Sàrl Brandenburg Archie 15 Acquico 3 Sàrl Brandenburg Archie 15 Acquico 4 Sàrl Brandenburg Archie 24 Acquico 1 Sàrl Brandenburg Archie 24 Acquico 2 Sàrl Brandenburg Archie 24 Acquico 3 Sàrl Brandenburg Archie 24 Acquico 4 Sàrl Brandenburg Archie GP Sàrl Brandenburg Barrel Cologne BuyCo B.V. Brandenburg Barrel Dutch HoldCo B.V. Brandenburg Barrel Muelheim BuyCo B.V. Brandenburg Barrel Nuremberg BuyCo B.V. Brandenburg Barrel Zweibruecken BuyCo B.V. Brandenburg Properties 1 Sàrl Brandenburg Properties 10 BV Brandenburg Properties 11 BV Brandenburg Properties 12 BV Brandenburg Properties 13 BV Brandenburg Properties 2 Sàrl Brandenburg Properties 3 Sàrl Brandenburg Properties 4 Sàrl Brandenburg Properties 5 Sàrl Brandenburg Properties 6 BV Brandenburg Properties 7 BV Brandenburg Properties 8 BV Brandenburg Properties 9 BV Brandenburg Properties Sàrl Buckfield Property Ltd. Clackmannanshire Limited Clairwood Limited Corbiere Private Office Limited Corbiere Property Investments (Hanover Square) Limited Corbiere Property Investments Limited DAM Trustees Limited Datchworth Properties Unlimited Draco Nominees Limited Edgmond Holdings Limited* Euro Petroleum Trading Limited Fisher Island Holdings Limited Fizzyberry Limited Fulmer Properties Limited* Geneva Moon Limited Halebourne Limited* Hestia Property Limited HPFM (Trinity Lodge) Limited Hunter Healthcare Property Limited 71

72 c108323pu050 Proof 3: _12:43 B/L Revision: Name Current directorships/partnerships Previous directorships/partnerships Nigel Ward Saffery Champness Société Avec Responsabilité Limitée Saffery Champness Trust Corporation Saffery Limited Saffery Trustee Company (C.I.) Limited Saffron Maritime Limited Sansiri Guernsey (2009) Limited Shefford Limited Shore SFK Limited Tamar European Industrial Fund Limited The Family of N & J Rothschild S.A. The St John Ambulance & Rescue Service LBG Tidegrove Holdings Limited Tidegrove Management Limited Uttrup Investment Management Fund PCC Limited Uttrup Investment Management Limited Westerwald Holdings Inc. Yellowstrand Limited Yillman Limited * (in members voluntary liquidation) AnaCap Credit Opportunities II Limited AnaCap Credit Opportunities GP II Limited BlueBay Direct Lending Fund I General Partner Limited Braemar Group PCC Limited Braemar Agricultural Land Investments Limited BSA 001 Limited BSA 002 Limited Crystal Amber Fund Limited Ground Rents Wealth General Partner Limited TMG 001 Limited TMG 002 Limited TMG 004 Limited Hydra Investments Group Limited Indian Star Limited Inniskerry Limited* Jermyn Pte Ltd Les Prairies Investment Trust Limited* Libra-Alpha Investments Limited Longlands Finance No 2 Limited Marsworth Properties Unlimited Medieval Investment Fund Limited Mensa Nominees Limited Moules Investments Limited Oceantide Limited* Paloma Group Limited** Paloma Holdings Limited** Paloma Limited Paloma Management Limited** Paloma Properties Limited** Paragon Outcomes Holdings Limited Pavo Nominees Limited Pictor Nominees Limited Puma Brandenburg Limited Puma Property Advisors Limited Quantum Energy Limited Redcliffe Property Limited* Redvale Properties Limited* Regeneration (G.P.) Limited Retreat Developments (Tenenbaum) Limited RHK Nominees Limited Rysaffe Limited Saffery Champness Trustees Limited SAR Limited Silver Stallion Limited Silverdale Holdings Limited Southern Cross Nominees Limited Stanco International Inc Thea Investments Inc* Thornhill Premium Fund Limited* Topibel S.A. Treal Plc Trio Finance Limited* Tucana Nominees Limited Virgo Investments Group Limited Wainbridge Capital Limited Wiggington Properties Unlimited ** (in compulsory liquidation) Africa Management Limited Centrix IX Fund Limited Eidos Investments (Guernsey) Limited Gateway (Leeds) Ground Rents Limited Masshouse Ground Rents Limited Midlands Ground Rents Limited North West Ground Rents Limited Postbox Ground Rents Limited Premier RENN Entrepreneurial Fund Limited RM Squared Limited TMG 003 Limited Yorkshire Ground Rents Limited 72

73 c108323pu050 Proof 3: _12:43 B/L Revision: Name Current directorships/partnerships Previous directorships/partnerships David Warr Breedon Aggregates Limited Central Way House Limited Crystal Amber Fund Limited FRM Diversified Alpha Limited* Gemini Holdings Limited The Guernsey Community Foundation LBG The Horizon Fund PCC Limited Laurent Investments Limited LP (Brentford) Limited Lunar Partnership (Brentford) Limited Mid Europa Fund Management Limited Nightwatch Limited Schroder Real Estate Investment Trust Limited Shoreham Investments Limited SREIT Holding Company Limited SREIT (Mid City) Limited* SREIT (No. 2) Limited SREIT Property Limited Sunflowers Limited UK Select Trust Limited Unigestion (Guernsey) Limited Uni-Hedge Arbitrage IC Limited Uni-Hedge Commodity Alpha IC Limited Uni-Hedge Concentrated Long/Short Equity IC Limited Uni-Hedge Credit IC Limited* Uni-Hedge Defensive TT IC Limited Uni-Hedge Diversified IC Limited Uni-Hedge GBF Alternative IC Limited* Uni-Hedge Global Equity FO IC Limited Uni-Hedge Global Equity IC Limited Uni-Hedge GMT IC Limited Uni-Hedge ICC Limited Uni-Hedge Patrimoine IC Limited Uni-Hedge Systematic Non-tend IC Ltd* The Uni-Hedge Trust Diversified JPY Distribution Fund Uni-Hedge Vaudoise I IC Limited * (in members voluntary liquidation) Antares Inc Athos Group Limited Bajan Limited BDO Reads Management Limited BGL Reads Trust Company Limited BGL Trustees Limited Bright Star Limited Business Advisory Service Limited C.M.S. Limited Channel Corporate Services Limited Chart Trust Company Limited Codale Secretaries Limited Cosign Limited Cosign Nominees Limited Cosign Services Limited First Tower Trustees Limited Fortis Intertrust Management (Guernsey) Limited Fortis Reads International Management Limited Fortis Reads Trustees Limited Fortis Trustees (Guernsey) Limited FRIM Services Limited Hemisphere Defensive HF PCC Limited Hemisphere Defensive HF (USD) Limited Holme Head Limited International Industrial Developments Limited Intertrust International Management Limited Intertrust Management (Guernsey) Ltd (Amalgamated) Intertrust Management Limited Intertrust Trustees (Guernsey) Limited Intertrust Trustees Limited Invista Foundation Property Bootle Limited Invista Foundation Property Limited JSH Services Limited Lexus Services Limited LP (Alfreton) Limited LP (Bristol) Limited LP (Cannock) Limited LP (Fleet) Limited LP (Havant) Limited LP (Hemel Hempstead) Limited LP (New Malden) Limited LP (Northampton) Limited LP (Tudor Street) Limited LP (York) Limited Lunar Partnership (Alfreton) Limited Lunar Partnership (Bolton) Limited Lunar Partnership (Bristol) Limited Lunar Partnership (Cannock) Limited Lunar Partnership (Fleet) Limited Lunar Partnership (Havant) Limited Lunar Partnership (Hemel Hempstead) Ltd Lunar Partnership (New Malden) Limited Lunar Partnership (Northampton) Limited Lunar Partnership (Scunthorpe) Limited Lunar Partnership (Tudor Street) Limited Lunar Partnership (York) Limited Lunar Partnership Limited Marwyn Capital Management Limited Marwyn General Partner Limited 73

74 c108323pu050 Proof 3: _12:43 B/L Revision: Name Current directorships/partnerships Previous directorships/partnerships Marwyn Neptune Fund Marwyn Value Investors Limited Merley Holdings Limited MPR Trust Company Limited Opportunities Fund PCC Limited Penhall Limited Perbury Limited Phoenix Continuation Cayman Limited Porthos Group Limited Pritchards Secretarial Services Ltd (Amalgamated) Pritchards Trustees Limited Probus Reads Trust Company Limited Relton Holdings Limited Ringwood Investments Limited RM Holdings Limited Spread Nominees Limited Spread Services Limited Spread Trustee Company Limited Stocksfield Limited The Defensive Strategies Fund Limited Tremoille Properties Limited Uni-Hedge Global Equity PCC Limited Uni-Hedge PCC Limited Westlands Holdings Limited White Mist Limited Willbess Limited 5.2 Within the period of five years preceding the date of this document none of the Directors: has any convictions in relation to fraudulent offences; has been a director or senior manager (who is relevant to establishing that a company has the appropriate expertise and experience for the management of that company) of any company at the time of any bankruptcy, receivership or liquidation of such company save as described in paragraph 5.1 above; or has received any official public incrimination and/or sanction by any statutory or regulatory authorities (including designated professional bodies) or has been disqualified by a court from acting as a director of a company or from acting in the management or conduct of the affairs of a company. 5.3 None of the Directors has any potential conflicts of interest between their duties to the Company and their private interests or other duties. 6 Directors Remuneration 6.1 The aggregate of the remuneration (including any contingent or deferred compensation) paid and benefits in kind granted to the Directors by the Company in respect of the financial year ended 31 December 2012 was 53,828 made up as follows: Name Remuneration ( ) Helen Green 18,054 Nigel Ward 16,260 David Warr* 6,329 John Boothman** 13,185 * Appointed on 22 August 2012 ** Retired on 22 August 2012 No amounts were set aside or accrued by the Company to provide pension, retirement or similar benefits for directors in respect of the financial year ended 31 December

75 c108323pu050 Proof 3: _12:43 B/L Revision: 7 Directors and Others Interests 7.1 None of the Directors holds any interest in the share capital of the Company as at the Latest Practicable Date. 7.2 At the date of this document, it is not expected that any Director will have any interest in the share capital of the Company following the Issues. 7.3 So far as is known to the Company by virtue of the notifications made to it pursuant to the Disclosure and Transparency Rules, as at the Latest Practicable Date the following persons held directly or indirectly three per cent. or more of the Company s voting rights: Name Number of voting rights held Percentage of voting rights Cheviot Asset Management 649, % Rathbone Brothers 455, % Brewin Dolphin Limited 453, % Charles Stanley Group plc 427, % JP Morgan 425, % Save as set out in this Part 9, the Company is not aware of any person who holds as shareholder (within the meaning of the Disclosure and Transparency), directly or indirectly, three per cent. or more of the voting rights of the Company. 7.4 None of the shareholders referred to in paragraph 7.3 above has different voting rights from any other holder of shares in respect of any shares held by them. 7.5 The Company is not aware of any person who directly or indirectly, jointly or severally, owns or could exercise control over the Company. 7.6 The Company and the Directors are not aware of any arrangements, the operation of which, may at a subsequent date result in a change in control of the Company. 7.7 Save as set out in paragraph 7.3 above, the Directors are not aware of any other interest that is material to the Issues. 8 Directors letters of appointment There are no service contracts between any of the Directors and the Company. Each of the Directors has executed a letter of appointment from the Company dated 2 May 2013 which shall continue in force until retirement or resignation in accordance with the Articles or any legislation in force in respect of the Company from time to time. 9 Organisational structure and subsidiaries The Company has no subsidiaries. 10 Securities laws The distribution of this document and the offer of New Ordinary Shares and/or New ZDP Shares in certain jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any restrictions, including those set out in the paragraphs that follow. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction United States The New Ordinary Shares and the New ZDP Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States, and accordingly may not be offered or sold within the United States, or to or for the account or benefit of, US Persons. The New Ordinary Shares and the New ZDP Shares are only being offered outside the United States to non-us Persons in reliance on the exemption from registration provided by Regulation S European Economic Area In relation to each member state of the European Economic Area which has implemented the Prospectus Directive, as amended (each a relevant member state ), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member 75

76 c108323pu050 Proof 3: _12:43 B/L Revision: state (the relevant implementation date ), no New Ordinary Shares or New ZDP Shares have been offered or will be offered to the public in that relevant member state prior to the publication of a prospectus in relation to the New Ordinary Shares and/or the New ZDP Shares which has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in that relevant member state, all in accordance with the Prospectus Directive, except (with effect from and including the relevant implementation date): to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than c43,000,000; and (iii) an annual turnover of more than c50,000,000, as shown in its last annual consolidated accounts; to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior written consent of Numis; or in any other circumstances which do not require the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive, provided that no such offer of New Ordinary Shares and/or New ZDP Shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a relevant member state and each person who initially acquires any New Shares or to whom any offer is made under the Issues will be deemed to have represented, acknowledged and agreed that it is a qualified investor within the meaning of Article 2(1)(e) of the Prospectus Directive. For the purposes of this provision, the expression an offer of New Ordinary Shares and/or New ZDP Shares to the public in relation to any New Ordinary Shares and/or New ZDP Shares in any relevant member state means the communication in any form and by any means of sufficient information on the terms of any New Ordinary Shares and/or New ZDP Shares to be offered so as to enable an investor to decide to purchase or subscribe for the New Ordinary Shares and/or New ZDP Shares, as the same may be varied in that relevant member state by any measure implementing the Prospectus Directive in that relevant member state United Kingdom Other than pursuant to the Offer for Subscription, no New Ordinary Shares and/or New ZDP Shares have been offered or sold or will be offered or sold to persons in the United Kingdom prior to Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which will not result in a breach of any applicable provisions of the FSMA General No action has been or will be taken in any jurisdiction, other than the United Kingdom, that would permit a public offering of the New Ordinary Shares and/or New ZDP Shares, or possession or distribution of this document or any other offering material, in any country or jurisdiction where action for that purpose is required. Accordingly, the New Ordinary Shares and/or New ZDP Shares may not be offered or sold, directly or indirectly, and neither this document nor any other offering material or advertisement in connection with the New Ordinary Shares and/or New ZDP Shares may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction. Persons into whose possession this document comes should inform themselves about and observe any restrictions on the distribution of this document and the offer of New Ordinary Shares and/or New ZDP Shares, including those in the paragraphs above. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such 76

77 c108323pu050 Proof 3: _12:43 B/L Revision: jurisdiction. This document does not constitute an offer to subscribe for or buy any of the New Ordinary Shares and/or New ZDP Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction. 11 Working Capital The Company is of the opinion that the Company has sufficient working capital for its present requirements, that is, for at least 12 months from the date of this document. 12 Significant Change There has been no significant change in the financial or trading position of the Company since 31 December 2012, being the date to which the latest audited financial information was published. 13 Litigation 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 a significant effect on the Company s financial position or profitability during the 12 months preceding the date of this document. 14 Material Contracts The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company within the two years immediately preceding the date of this document and are, or may be, material or have been entered into at any time by the Company and contain provisions under which the Company has an obligation or entitlement which is, or may be, material to the Company as at the date of this document: 14.1 Placing and Offer Agreement Pursuant to the Placing and Offer Agreement, Numis has agreed, as agent for the Company, to use its reasonable endeavours to procure subscribers for the New Ordinary Shares and the New ZDP Shares. Numis will be entitled to receive a corporate finance fee of between 35,000 and 150,000 depending on the Gross Proceeds of the Initial Placing and Offer. In addition, Numis will also be entitled to a commission of between 0.82 per cent. and 1.23 per cent. of the Gross Proceeds of the Issues together with reimbursement for its out-of-pocket expenses, including legal costs, in connection with the Issues, together, in each case, with applicable VAT. The corporate finance fee and the commission set out above are only payable if Admission occurs. The Placing and Offer Agreement is conditional, amongst other things, on: (a) (b) this document being approved by the FCA and being made available to the public in accordance with the Placing and Offer Agreement; and Admission occurring on or before 8.00 a.m. on 29 May 2013 (or such later time or date as Numis and the Company may agree). The Placing and Offer Agreement confers on Numis the right to terminate its obligations prior to Admission if, amongst other things: (a) (b) (c) (d) in the opinion of Numis any of the representations or warranties given under the Placing and Offer Agreement are not true and accurate or have become misleading; or in the opinion of Numis acting in good faith, the Company or either of the Investment Advisers is in breach of any of their respective obligations under the Placing and Offer Agreement; or in the opinion of Numis acting in good faith, a material adverse change occurs with respect to the Company or either of the Investment Advisers; or in the opinion of Numis acting in good faith, there is a change in stock market conditions (primary or secondary) or an incident of terrorism or outbreak of hostilities or a suspension or material limitation in trading of securities generally on any stock exchange or a disruption of settlement systems or a material disruption or general moratorium in commercial banking as would, in the opinion of Numis make it impracticable or inadvisable to proceed with the Issues. 77

78 c108323pu050 Proof 3: _12:43 B/L Revision: The Placing and Offer Agreement also contains: (a) certain customary warranties given by the Company and certain customary warranties given by the Investment Advisers; (b) customary indemnities given by the Company in favour of Numis and customary indemnities given by the Investment Advisers in favour of Numis; and (c) certain undertakings from the Company relating, amongst other things, to consultation with, and the provision of information to, Numis Management Agreement A management agreement dated 11 December 2006 between the Company and the Investment Manager pursuant to which the Investment Manager has agreed to provide investment management services to the Company in relation to the portfolio of assets held by it from time to time. In consideration for its services thereunder, the Investment Manager is entitled to receive a management fee of 0.7 per cent. per annum of the Company s total assets, calculated monthly and payable quarterly in arrears, out of which it pays fees to the Investment Advisers. The Investment Manager is also paid a shareholder communication and support fee, currently 3,100 per annum. The Investment Manager is also potentially entitled to a performance fee, of 15 per cent. of any excess of the Net Asset Value per Ordinary Share over a benchmark NAV per share multiplied by the time weighted number of shares in issue during the relevant financial period. The Investment Manager has agreed that if the total expense ratio of the Company (ignoring any performance fee and any non-routine professional expenses) for any financial period will exceed 1.5 per cent. of the Company s total assets it will reimburse or, to the extent not already paid, waive that part of its management fee and/or performance fee paid or payable in respect of that relevant financial period so as to reduce the total expense ratio of the Company for that period to 1.5 per cent. of total assets, provided always that the Investment Manager shall in any event be entitled to a minimum management fee of 100,000 per annum. In addition to the fees referred to above, the Investment Manager is also entitled to be reimbursed the costs of delegating administration services. The total amount it may be reimbursed shall not exceed 0.12 per cent. per annum of the Company s total assets but is subject to a minimum annual payment of 55,000. Pursuant to the management agreement, the Investment Manager is entitled, with the written consent of the Directors, to delegate certain of its duties and responsibilities. The Investment Manager has delegated responsibility for the management of the Portfolios to the Investment Advisers. The Investment Manager has the benefit of an indemnity from the Company in relation to liabilities incurred by the Investment Manager in the discharge of its duties other than those arising by reason of any negligence, wilful default, fraud or breach of agreement of or by the Investment Manager or any party to whom it has delegated any of its functions under the management agreement The Investment Manager s appointment is terminable by either party on not less than 12 months notice. The management agreement may also be terminated by either the Investment Manager or the Company if the other party has committed a material and continuing breach of the agreement or has gone into liquidation or receivership Registrar Agreement A registrar agreement dated 1 December 2011 between the Registrar and the Company pursuant to which the Registrar has agreed to provide registrar services to the Company. The Registrar is entitled to an annual fee of the higher of (a) 3,000 per register per annum or (b) the sum of 5 per shareholder per annum, 60 pence per intra CREST transfer, 1.50 per CREST stock deposit/withdrawal and 10 per non-crest transfer. The Registrar shall also be entitled to fees for the provision of a UK transfer agent facility of 1,500 per annum and fees for processing dividend payments and proxy appointments. The Registrar is entitled to receive reimbursement for disbursments incurred in connection with the services provided under the agreement. The agreement contains an indemnity from the Company in favour of the Registrar for any liabilites it may incur in carrying out its duties under the agreement, save in the case of fraud, negligence, wilful misconduct, wilful default or breach by it of the 78

79 c108323pu050 Proof 3: _12:43 B/L Revision: terms of the agreement or the CREST rules. The agreement may be terminated by either the Company or the Registrar giving to the other at any time, after 6 months from the date of the agreement, not less than 90 days notice in writing. The agreement may also be terminated by immediate notice in writing if either the Company or the Registrar commits any material and continuing breach of the agreement or goes into liquidation Administration Agreement An administration agreement dated 28 November 2008 between the Company, the Investment Manager and the Administrator, pursuant to which the Investment Manager has delegated the provision of administrative and secretarial services to the Administrator in respect of the Company. The Administrator is entitled to receive an annual fee for its services of 0.12 per cent. of the Company s total assets, subject to a minimum annual fee of 55,000. The Administrator is also entitled to reimbursement of out of pocket expenses reasonably incurred by it in carrying out its duties. The agreement contains an indemnity from the Investment Manager in favour of the Administrator and its agents or delegates against any liabilities which they may incur in carrying out their duties under the agreement, save in the case of fraud, negligence, bad faith or wilful default. The agreement may be terminated by the Company or the Administrator on not less than 3 months notice in writing. The agreement may also be terminated by immediate notice in writing in circumstances including, inter alia, material and continuing breach of the agreement, insolvency of any party or on termination of the management agreement Global Custody Agreement The Custodian of the Company is BNP Paribas Trust Company (Guernsey) Limited, a company which was incorporated with limited liability in Guernsey on 27 October 2000 with registered number and whose principal activity is the provision of trustee and custodian services to collective investment schemes. The Custodian is licensed to carry out controlled investment business in the Bailiwick of Guernsey. As at the date of this document, the Custodian s issued and paid up share capital is 2 million divided into 2 million shares of 1 each. BNP Paribas Trust Company (Guernsey) Limited is a wholly-owned subsidiary of BNP Paribas Securities Services (Holdings) Limited, a company incorporated in the island of Jersey which, in turn, is ultimately owned by BNP Paribas S.A., a company incorporated in France. The registered office of the Custodian is BNP Paribas House, St Julian s Avenue, St Peter Port, Guernsey GY1 3WE. The Company has entered into a global custody agreement dated 31 July 2008 between the Company and the Custodian, pursuant to which the Custodian is appointed to provide a safekeeping service to the Company. The Custodian holds all the investments (including any interests in other funds) and receives all investment income on behalf of the Company. Custody arrangements have been delegated to BNP Paribas Securities Services SCA, Guernsey Branch ( BP2S ) which uses a global network of sub-custodians. Securities held in CREST are registered in the name of BNP Paribas Securities Services Nominees Limited and securities held in Euroclear are held in the name of BP2S. BP2S is a limited liability company incorporated in France (registered number R.C.S. Paris) and is regulated in Guernsey by the Guernsey Financial Services Commission to undertake investment and fiduciary related business in Guernsey. Its registered office is 3 Rue D Antin, Paris, France. The Custodian is entitled to receive a fee for each safekeeping and settlement transaction undertaken on the Company s behalf, subject to an overall minimum annual fee of 10,000. The Custodian is also entitled to reimbursement of out of pocket expenses properly incurred by it in carrying out its duties. The agreement contains an indemnity in favour of the Custodian and any sub-custodians or any of their respective agents or nominees against any liabilities which they may incur in carrying out their duties under the agreement. The agreement may be terminated by either party on not less than 90 days notice in writing. The agreement may also be terminated by either party by immediate notice in writing if required to do so by any competent legal, governmental, supervisory or regulatory authority or body. 79

80 c108323pu050 Proof 3: _12:43 B/L Revision: 14.6 Receiving Agent Agreement The receiving agent agreement dated 8 May 2013 between the Company and the Receiving Agent pursuant to which the Receiving Agent has agreed to act as receiving agent to the Offer for Subscription. The fees payable are based on the number of applications received and are subject to a minimum fee. The agreement contains a standard indemnity from the Company to the Receiving Agent. 15 Related Party Transactions Save as disclosed in the Notes to the Financial Statements of the Company s annual reports to 31 December 2010, 2011 and 2012, which are incorporated by reference into this document, no other related party transactions have taken place during the period covered by the historical financial information until the Latest Practicable Date. 16 Consent Numis has given and has not withdrawn its written consent to the inclusion in this document of its name and the references thereto in the form and context in which it appears. 17 Costs and expenses The Company has incurred fixed costs of approximately 200,000 in respect of the extraordinary general meeting held on 24 April 2013 to consider proposals for the Issues of the New Shares described in this document, updating the Articles to ensure that the Company complies with its ongoing legal and regulatory obligations, the development of the Initial Placing and Offer and the Placing Programme and the publication of this document. These fixed costs have been reflected in the NAV per Ordinary Share of pence at 30 April 2013 which was published on 3 May The Company will also incur variable costs in connection with the Issues which includes commission payable to Numis as well as professional fees which will increase in line with the total amount raised pursuant to the Issues. Investors will not be charged a fee in addition to the applicable Issue Price in order to subscribe for New Ordinary Shares and/or New ZDP Shares. The variable costs of the Initial Placing and Offer are dependent on subscriptions received but, by way of illustration, will be between 1.0 per cent. of the Gross Proceeds should the Initial Placing and Offer raise Gross Proceeds of 5,000,000 and 1.2 per cent. of Gross Proceeds should the Initial Placing and Offer raise 30,000,000. Assuming that the Initial Placing and Offer is fully subscribed and therefore that Gross Proceeds of 30,000,000 are raised, the expenses are expected to be approximately 370,000, resulting in Net Proceeds of 29,630,000. It is expected that these costs will be covered by the premium generated on issuing the New ZDP Shares at the Initial Placing and Offer Price. The variable costs of the Placing Programme are also dependent on subscriptions received but, by way of illustration, will be between 1.0 per cent. of Gross Proceeds should the aggregate amount raised pursuant to the Issues equal 5,000,000 and 1.2 per cent. of Gross Proceeds should the aggregate amount raised pursuant to the Issues equal 60,000,000. Assuming that Gross Proceeds of 30,000,000 are raised under the Initial Placing and Offer and a Gross Proceeds of a further 30,000,000 are raised under the Placing Programme, the expenses of the Placing Programme are expected to be approximately 350,000, resulting in Net Proceeds of 29,650,000. It is expected that these costs will be covered by any premium generated on issuing the New Ordinary Shares and the New ZDP Shares under the Placing Programme. 18 General 18.1 Assuming the Issues are fully subscribed, which would raise approximately 60 million, the estimated Net Proceeds of the Issues are expected to be 59,280,000. The proceeds will be applied as described in the section headed Investment objective and policy in Part 4 of this document. The effect of the Issues will be to increase the net assets of the Company. On the assumption that the Issues are fully subscribed, the Issues will increase the net assets of the Company by approximately 59,280,000, equivalent to approximately 230 per cent. of the net assets of the Company of million as at the Latest Practicable Date. It is not expected that there will be any material impact on the earnings and liabilities per Ordinary Share as the 80

81 c108323pu050 Proof 3: _12:43 B/L Revision: Net Proceeds of the Issues are expected to be invested in investments consistent with the investment objective and policy of the Company. It is expected that the NAV per Ordinary Share and the Cover will be maintained or otherwise increased as a result of the Issues The consolidated financial statements of the Company in respect of the three years ended 31 December 2012 were reported on by KPMG Channel Islands Limited, a member of the Institute of Chartered Accountants for England and Wales, the auditors of the Company The Company has no tangible fixed assets and does not intend to acquire any and has not entered into any material commitments to acquire any tangible fixed assets Numis, which is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange, is acting exclusively for the Company and no-one else in connection with the Initial Placing and Offer, the Placing Programme and the proposed Admission. Numis will not regard any other person as its customer or be responsible to any other person for providing the protections afforded to customers of Numis nor for providing advice in relation to the transactions or arrangements detailed in this document. Numis is not making any representation or warranty, express or implied, as to the contents of this document and accordingly without limiting the statutory rights of any recipient of this document, no liability is accepted by Numis for the accuracy of any information or opinions contained in this document or for any omission of any material information for which it is not responsible Certain market statistics in paragraph 3 of Part 1 and paragraph 6 of Part 4 have been extracted from published third party sources (being Datastream and FE Analytics). So far as the Company is aware all 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 All additional fees and expenses incurred by the Company including, but not limited to, listing fees, regulatory fees and tax exemption fees are paid out of the assets of the Company. 19 Documents available for inspection 19.1 Copies of the following documents will be available for inspection on the Company s website at and during normal business hours on any weekday (public holidays excepted) at the registered office of the Company at Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 1EJ, up to and including 7 May 2014: the Memorandum and Articles of the Company; the audited consolidated accounts of the Company for the three financial years ended 31 December 2012; and this document. Dated: 8 May

82 c108323pu050 Proof 3: _12:43 B/L Revision: PART 10: TAXATION The comments below are of a general and non-exhaustive nature based on the Directors understanding of the current revenue law and published practice in Guernsey and the United Kingdom. The comments relate to the position of persons who are resident or ordinarily resident in Guernsey or the United Kingdom for tax purposes, who hold their Shares as an investment and who are the absolute beneficial owners of Shares. The comments below may not apply to certain classes of persons, such as dealers, collective investment schemes, insurance companies, persons holding 10 per cent. or more of the Shares and persons making or holding their investment with the purpose of obtaining a UK tax advantage. Investors should note that tax law and interpretation can change (possibly with retrospective effect) and that, in particular, the levels, basis of and reliefs from taxation may change. Such changes may alter the benefits of investment in the Company. If you are in any doubt about your tax position, or if you may be subject to tax in a jurisdiction other than Guernsey or the United Kingdom, you should consult your professional adviser. United Kingdom Taxation (i) The Company The Directors intend to continue to conduct the affairs of the Company so that it does not become resident in the United Kingdom for UK tax purposes. Accordingly, and provided that the Company does not carry on a trade in the United Kingdom (whether or not through a branch, agency or permanent establishment situated there), the Company will not be subject to UK income tax or corporation tax other than on certain types of UK source income. The Directors do not consider the Company to be an offshore fund for UK tax purposes with respect to either the Ordinary Shares or the ZDP Shares. The Directors do not intend the composition of the Company s Portfolios to be such that the Company would be classed as a bond fund for UK tax purposes. (ii) Ordinary Shareholders Dividends The Company will not be required to withhold UK tax at source when paying a dividend. Shareholders who are subject to UK income tax should treat dividends paid on the Ordinary Shares as income for UK income tax purposes and should be entitled to a UK tax credit in respect of any dividend paid. The tax credit will equal one ninth of the amount of dividend. The income tax payable in respect of the dividend will be based on the amount of dividend plus the UK tax credit. The individual should be entitled to deduct the UK tax credit from the income tax payable. However, if the income tax payable is less than the UK tax credit, the excess can neither be claimed as a tax refund nor used against any other income tax liability. Ordinary Shareholders who are subject to corporation tax and who are not small companies should be able to claim exemption from UK corporation tax in respect of any dividend received. Small companies will be subject to UK corporation tax as income on dividends received on the ordinary shares. A company is small for these purposes for any accounting period during which staff headcount is below 50 and either turnover or balance sheet total is less than or equal to c10 million. Ordinary Shareholders should note that income received by the Company may be subject to withholding taxes. However, Ordinary Shareholders will not be entitled to claim relief in respect of any such withholding tax or underlying tax. Disposals UK taxpayers (whether subject to UK Capital Gains Tax or to UK Corporation Tax) should treat any gain arising on the sale, redemption or other disposal of Ordinary Shares at the time of such sale, redemption or disposal as a chargeable gain. Equally, any loss should be an allowable loss. 82

83 c108323pu050 Proof 3: _12:43 B/L Revision: Ordinary Shareholders who are subject to UK Capital Gains Tax may, depending on their circumstances, be able to use their annual exemption from Capital Gains Tax against any such chargeable gain. For Ordinary Shareholders subject to United Kingdom Corporation Tax, indexation allowance may reduce any chargeable gain arising on disposal of Ordinary Shares but will not create or increase an allowable loss. (iii) ZDP Shareholders Dividends No dividends are payable on the ZDP Shares. Redemption and Disposals The ZDP Shares should not fall within the definition of an offshore fund for the purposes of United Kingdom tax legislation. Therefore, in principle, any profit on a disposal of ZDP Shares or on receipt of the Final Capital Entitlement by a UK resident or ordinarily resident ZDP Shareholder or a ZDP Shareholder who carries on a trade in the United Kingdom through a branch, agency or permanent establishment with which their investment in the Company is connected, should be taxed as a chargeable gain for UK tax purposes, subject to applicable reliefs and allowances. There are two exceptions to the treatment described in the preceding paragraph of which ZDP Shareholders should be aware. ZDP Shareholders subject to UK Corporation Tax For ZDP Shareholders who are subject to UK Corporation Tax, if the Final Capital Entitlement is received otherwise than pursuant to a liquidation of the Company, the amount by which the Final Capital Entitlement exceeds the amount originally subscribed for the ZDP Shares will instead be treated as a distribution for UK corporation tax purposes. If the relevant ZDP Shareholder is a company that is not small (see below), that distribution will normally be exempt from corporation tax. For a company which is small, that distribution will be subject to corporation tax as income. A company is small for the purposes of the previous paragraph for any accounting period during which staff headcount is below 50 and either turnover or balance sheet total is less than or equal to c10 million. Disguised Interest The Finance (No.2) Bill 2013 contains new rules (the New Rules ) intended to make returns which are economically equivalent to interest subject to income tax as income. The New Rules have not yet been enacted, nor has HMRC published any draft guidance. The following comments therefore represent the Directors understanding of the proposals at the present time; but ZDP Shareholders should note that the position could change, possibly quite significantly, before the New Rules are finally enacted. It is known that HMRC considers that the New Rules are in principle capable of applying to zero dividend preference shares. However there are to be two important exceptions. The first exception applies to shares that are admitted to trading on a regulated market and which were issued before 6 April The Directors consider that this exception should in principle apply to the Existing ZDP Shares. The second exception applies to shares that are admitted to trading on a regulated market where, at the time of issue, the return cannot be characterised as economically equivalent to interest (as defined by the New Rules). As a matter of strict legal interpretation of the draft legislation, it is not entirely clear whether the second exception does apply to the New ZDP Shares. However, the Directors have considered the publicly available information concerning the intended scope of the second exception and the underlying policy reasons for that exception and have concluded that the better view is that the second exception should in principle be available for the New ZDP Shares. Neither exception will apply if, on or after 6 April 2013, there are arrangements made by any person in relation to the Existing ZDP Shares or (as the case might be) the New ZDP Shares where the main purpose or one of the main purposes is to ensure that the return is in fact 83

84 c108323pu050 Proof 3: _12:43 B/L Revision: economically equivalent to interest. The Directors do not intend that the Company will make any such arrangements and ZDP Shareholders should consider their position very carefully before making any such arrangements with respect to their own holdings of ZDP Shares and should take appropriate professional advice. Similar rules concerning the UK tax treatment of disguised interest already exist for UK Corporation Tax but are subject to an exclusion for arrangements that have no tax avoidance purpose. The proposed New Rules for income tax do not contain such an exclusion. If the New Rules did apply to the New ZDP Shares, it is likely that the return on the New ZDP Shares would be subject to tax as income. It is unclear whether this would be on sales and other disposals of New ZDP Shares or only when the New ZDP Shares are redeemed. It is also unclear how the New Rules would work if the Existing ZDP Shares were excepted from the New Rules but the New ZDP Shares, which are to be fungible with the Existing ZDP Shares, are not. (iv) Stamp Duty and Stamp Duty Reserve Tax ( SDRT ) In practice, no UK stamp duty or SDRT will generally be payable on the issue or transfer of Ordinary Shares or ZDP Shares or an agreement to transfer Ordinary Shares or ZDP Shares. Guernsey Taxation (i) The Company The Company currently has tax exempt status pursuant to the Income Tax (Exempt Bodies) (Guernsey) Ordinance, The Company will need to reapply annually for exempt status, an application that currently incurs a fee of 600 per annum. The Company is therefore not considered resident in Guernsey for Guernsey income tax purposes and is exempt from tax in Guernsey on both bank deposit interest and any income that does not have its source in Guernsey. It is not anticipated that any income other than bank interest will arise in Guernsey and therefore the Company is not expected to incur any additional liability to Guernsey tax. Payments of dividends and interest by a company that has exempt status for Guernsey tax purposes are regarded as having their source outside Guernsey and hence are payable without deduction of tax in Guernsey. In the absence of exempt status, the Company would be treated as resident in Guernsey for Guernsey income tax purposes and would be subject to a zero rate of income tax. At present Guernsey does not levy taxes upon capital inheritances, capital gains (with the exception of a dwellings profit tax), gifts, sales or turnover, nor are there any estate duties, save for an ad valorem fee for the grant of probate or letters of administration. No stamp duty is chargeable in Guernsey on the issue, transfer or redemption of Shares in the Company. (ii) Shareholders Any shareholder who is resident for tax purposes in Guernsey, Alderney or Herm will incur Guernsey income tax on any dividends paid on Shares owned by them but will suffer no deduction of tax by the Company from any such dividends payable by the Company where the Company is granted exempt status. The Company is required to provide details of distributions made to shareholders resident in the Islands of Guernsey, Alderney and Herm to the Director of Income Tax in Guernsey. Shareholders resident outside Guernsey will not be subject to any income tax in Guernsey in respect of any Shares owned by them including on the redemption or disposal of their holding of Shares in the Company. 84

85 c108323pu060 Proof 3: _12:43 B/L Revision: PART 11: TERMS AND CONDITIONS OF APPLICATION UNDER THE INITIAL PLACING AND PLACING PROGRAMME 1 Introduction Each placee which confirms its agreement to Numis to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and/or the Placing Programme will be bound by these terms and conditions and will be deemed to have accepted them. The Company and/or Numis may require any Placee to agree to such further terms and/or conditions and/or give such additional warranties and/or representations as it/they (in its/their absolute discretion) see fit. 2 Agreement to subscribe for New Ordinary Shares and/or New ZDP Shares Conditional on: (i) Admission of New Ordinary Shares and/or New ZDP Shares issued pursuant to the Initial Placing occurring and becoming effective by 8.00 a.m. (London time) on or prior to 29 May 2013 (or such later time and/or date, not being later than 8.00 a.m. on 30 June 2013, as the Company and Numis may agree) and any subsequent admission under the Placing Programme occurring not later than 8.00 a.m. on such other dates as may be agreed between the Company and Numis prior to the closing of each placing under the Placing Programme, not being later than 7 May 2014; (ii) the Placing and Offer Agreement becoming otherwise unconditional in all respects and not having been terminated on or before 8.00 a.m. on 7 May 2014; and (iii) Numis confirming to the Placees their allocation of New Ordinary Shares and/or New ZDP Shares, a Placee agrees to become a member of the Company and agrees to subscribe for those New Ordinary Shares and/or New ZDP Shares allocated to it by Numis at the applicable Issue Price. To the fullest extent permitted by law, each Placee acknowledges and agrees that it will not be entitled to exercise any remedy of rescission at any time. This does not affect any other rights the Placee may have. 3 Payment for New Ordinary Shares and/or New ZDP Shares Each Placee must pay the applicable Issue Price for the New Ordinary Shares and/or New ZDP Shares issued to the Placee in the manner and by the time directed by Numis. If any Placee fails to pay as so directed and/or by the time required, the relevant Placee s application for New Ordinary Shares and/or New ZDP Shares shall be rejected. 4 Representations and Warranties By agreeing to subscribe for New Ordinary Shares and/or New ZDP Shares, each Placee which enters into a commitment to subscribe for New Ordinary Shares and/or New ZDP Shares will (for itself and any person(s) procured by it to subscribe for New Ordinary Shares and/or New ZDP Shares and any nominee(s) for any such person(s)) be deemed to represent and warrant to each of the Company, the Investment Manager, the Investment Advisers and Numis that: (a) (b) in agreeing to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and/or the Placing Programme, it is relying solely on this Prospectus and any supplementary prospectus issued by the Company and not on any other information given, or representation or statement made at any time, by any person concerning the Company, the Initial Placing and/or the Placing Programme. It agrees that none of the Company, the Investment Manager, the Investment Advisers, Numis or the Registrar, nor any of their respective officers, agents employees, will have any liability for any other information or representation. It irrevocably and unconditionally waives any rights it may have in respect of any other information or representation; if the laws of any territory or jurisdiction outside the United Kingdom are applicable to its agreement to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and/or the Placing Programme, it warrants that it has fully observed all such laws and obtained all governmental and other consents which may be required thereunder and complied with all necessary formalities and it has paid all issue, transfer or other taxes due in connection with its acceptance in any jurisdiction of the New Ordinary Shares and/or New ZDP Shares and that it has not taken any action, or omitted to take any action, which may result in the Company, the Investment Manager, the Investment Advisers, Numis or their 85

86 c108323pu060 Proof 3: _12:43 B/L Revision: (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) respective directors, officers, agents, employees and advisers being in breach of the laws of any jurisdiction in connection with the Initial Placing and/or the Placing Programme or its acceptance of participation in the Initial Placing and/or the Placing Programme; if it is acquiring any New Ordinary Shares and/or New ZDP Shares as a fiduciary or agent for one or more accounts, the Placee has sole investment discretion with respect to each such account and full power and authority to make such foregoing representations, warranties, acknowledgements and agreements on behalf of each such account; it has carefully read and understands this Prospectus in its entirety and acknowledges that it is acquiring New Ordinary Shares and/or New ZDP Shares on the terms and subject to the conditions set out in this Part 11 and the Articles as in force at the relevant date of Admission of the relevant New Ordinary Shares and/or New ZDP Shares; it has not relied on Numis or any person affiliated with Numis in connection with any investigation of the accuracy of any information contained in this Prospectus; the content of this document is exclusively the responsibility of the Company and its Directors and neither Numis nor any person acting on its behalf nor any of its affiliates are responsible for or shall have any liability for any information, representation or statement contained in this Prospectus or any information published by or on behalf of the Company and will not be liable for any decision by a Placee to participate in the Initial Placing and/or the Placing Programme based on any information, representation or statement contained in this Prospectus or otherwise; it acknowledges that no person is authorised in connection with the Initial Placing and/or the Placing Programme to give any information or make any representation other than as contained in this Prospectus and, if given or made, any information or representation must not be relied upon as having been authorised by Numis, the Company, the Investment Manager or the Investment Advisers; it is not applying as, nor is it 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 section 67, 70, 93 or 96 of the Finance Act 1986 (depository receipts and clearance services); it accepts that none of the New Ordinary Shares nor the New ZDP Shares has been or will be registered under the laws of the United States, Canada, Australia, the Republic of South Africa or Japan. Accordingly, neither the New Ordinary Shares nor the New ZDP Shares may be offered, sold, issued or delivered, directly or indirectly, within any of United States, Canada, Australia, the Republic of South Africa or Japan unless an exemption from any registration requirement is available; if it is within the United Kingdom, it is a person who falls within Articles 49(2)(a) to (d) or 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 or is a person to whom the New Ordinary Shares and/or New ZDP Shares may otherwise lawfully be offered under such Order, or, if it is receiving the offer in circumstances under which the laws or regulations of a jurisdiction other than the United Kingdom would apply, that it is a person to whom the New Ordinary Shares and/or New ZDP Shares may be lawfully offered under that other jurisdiction s laws and regulations; if it is a resident in the EEA (other than the United Kingdom), it is a qualified investor within the meaning of the law in the relevant Member State implementing Article 2(1)(e)(i), (ii) or (iii) of Directive 2003/71/EC; in the case of any New Ordinary Shares and/or New ZDP Shares acquired by a Placee as a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive (i) the New Ordinary Shares and/or New ZDP Shares acquired by it in the Initial Placing and/or the Placing Programme have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive 2010/73/EU, or in circumstances in which the prior consent of Numis has been given to the offer or resale; or (ii) where New Ordinary Shares and/or New ZDP Shares have been acquired by it on behalf of persons in any relevant Member State other than qualified investors, the offer of those New Ordinary Shares and/or New ZDP Shares to it is not treated under the Prospectus Directive as having been made to such persons; 86

87 c108323pu060 Proof 3: _12:43 B/L Revision: (m) (n) (o) (p) (q) (r) (s) (t) (u) if it is outside the United Kingdom, neither this Prospectus nor any other offering, marketing or other material in connection with the Initial Placing and/or the Placing Programme constitutes an invitation, offer or promotion to, or arrangement with, it or any person whom it is procuring to subscribe for New Ordinary Shares and/or New ZDP Shares pursuant to the Initial Placing and/or the Placing Programme unless, in the relevant territory, such offer, invitation or other course of conduct could lawfully be made to it or such person and such documents or materials could lawfully be provided to it or such person and New Ordinary Shares and/or New ZDP Shares could lawfully be distributed to and subscribed and held by it or such person without compliance with any unfulfilled approval, registration or other regulatory or legal requirements; it does not have a registered address in, and is not a citizen, resident or national of, any jurisdiction in which it is unlawful to make or accept an offer of the New Ordinary Shares and/ or New ZDP Shares and it is not acting on a non-discretionary basis for any such person; if the Placee is a natural person, such Placee is not under the age of majority (18 years of age in the United Kingdom) on the date of such Placee s agreement to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and/or the Placing Programme and will not be any such person on the date any such agreement to subscribe under the Initial Placing or Placing Programme is accepted; it has not, directly or indirectly, distributed, forwarded, transferred or otherwise transmitted this Prospectus or any other offering materials concerning the Issues, the Initial Placing, the Placing Programme, the New Ordinary Shares and/or the New ZDP Shares to any persons within the United States or to any U.S. Persons, nor will it do any of the foregoing; it represents, acknowledges and agrees to the representations, warranties and agreements as set out under the heading United States Purchase and Transfer Restrictions in paragraph 5, below; it acknowledges that neither Numis nor any of its affiliates nor any person acting on its behalf is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Initial Placing and/or Placing Programme or providing any advice in relation to the Initial Placing and/or Placing Programme and participation in the Initial Placing and/or Placing Programme is on the basis that it is not and will not be a client of Numis and that Numis does not have any duties or responsibilities to it for providing the protections afforded to its clients or for providing advice in relation to the Initial Placing and/or Placing Programme nor in respect of any representations, warranties, undertakings or indemnities otherwise required to be given by it in connection with its application under the Initial Placing and/or the Placing Programme; it acknowledges that where it is subscribing for New Ordinary Shares and/or New ZDP Shares for one or more managed, discretionary or advisory accounts, it is authorised in writing for each such account; (i) to subscribe for the New Ordinary Shares and/or New ZDP Shares for each such account; (ii) to make on each such account s behalf the representations, warranties and agreements set out in this Prospectus; and (iii) to receive on behalf of each such account any documentation relating to the Initial Placing and/or Placing Programme in the form provided by the Company and/or Numis. It agrees that the provision of this paragraph shall survive any resale of the New Ordinary Shares and/or New ZDP Shares by or on behalf of any such account; it irrevocably appoints any director of the Company and any director of Numis to be its agent and on its behalf (without any obligation or duty to do so), to sign, execute and deliver any documents and do all acts, matters and things as may be necessary for, or incidental to, its subscription for all or any of the New Ordinary Shares and/or New ZDP Shares for which it has given a commitment under the Initial Placing and/or the Placing Programme, in the event of its own failure to do so; it accepts that if the Initial Placing and/or Placing Programme does not proceed or the conditions to the Placing and Offer Agreement are not satisfied or the New Ordinary Shares and/or New ZDP Shares for which valid application are received and accepted are not admitted to listing on the premium segment of the Official List (in the case of the New Ordinary Shares) and the standard segment (in the case of the New ZDP Shares) and to trading on the London Stock Exchange s main market for listed securities for any reason whatsoever then none of Numis or the Company, nor persons controlling, controlled by or 87

88 c108323pu060 Proof 3: _12:43 B/L Revision: (v) (w) (x) (y) (z) under common control with any of them nor any of their respective employees, agents, officers, members, stockholders, partners or representatives, shall have any liability whatsoever to it or any other person; in connection with its participation in the Initial Placing and/or Placing Programme it has observed all relevant legislation and regulations, in particular (but without limitation) those relating to money laundering ( Money Laundering Legislation ) and that its application is only made on the basis that it accepts full responsibility for any requirement to verify the identity of its clients and other persons in respect of whom it has applied. In addition, it warrants that it is a person: (i) subject to the Money Laundering Regulations 2007 in force in the United Kingdom; or (ii) subject to the Money Laundering Directive (2005/60/EC of the European Parliament and of the EC Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing); or (iii) subject to the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999, as amended, together with any regulations and guidance notes issued pursuant thereto; or (iv) acting in the course of a business in relation to which an overseas regulatory authority exercises regulatory functions and is based or incorporated in, or formed under the law of, a country in which there are in force provisions at least equivalent to those required by the Money Laundering Directive; it acknowledges that due to anti-money laundering requirements, Numis and the Company may require proof of identity and verification of the source of the payment before the application can be processed and that, in the event of delay or failure by the applicant to produce any information required for verification purposes, Numis and the Company may refuse to accept the application and the subscription moneys relating thereto. It holds harmless and will indemnify Numis and the Company against any liability, loss or cost ensuing due to the failure to process such application, if such information as has been required has not been provided by it; it acknowledges that any person in Guernsey involved in the business of the Company who has a suspicion or belief that any other person (including the Company or any person subscribing for New Ordinary Shares and/or New ZDP Shares) is involved in money laundering activities, is under an obligation to report such suspicion to the Financial Intelligence Service pursuant to the Terrorism and Crime (Bailiwick of Guernsey) Law, 2002, as amended; it acknowledges and agrees that information provided by it to the Company, Registrar will be stored both on the Registrar s and the Administrator s computer system and manually. It acknowledges and agrees that for the purposes of the Data Protection (Bailiwick of Guernsey) Law, 2001, as amended (the Data Protection Law ) and other relevant data protection legislation which may be applicable, the Registrar is required to specify the purposes for which it will hold personal data. The Registrar will only use such information for the purposes set out below (collectively, the Purposes ), being to: (i) process its personal data (including sensitive personal data) as required by or in connection with its holding of New Ordinary Shares and/or New ZDP Shares, including processing personal data in connection with credit and money laundering checks on it; (ii) communicate with it as necessary in connection with its affairs and generally in connection with its holding of New Ordinary Shares and/or New ZDP Shares; (iii) provide personal data to such third parties as the Registrar may consider necessary in connection with its affairs and generally in connection with its holding of New Ordinary Shares and/or New ZDP Shares or as the Data Protection Law may require, including to third parties outside the Bailiwick of Guernsey or the European Economic Area; (iv) without limitation, provide such personal data to the Company or the Investment Manager or the Investment Advisers and their respective associates for processing, notwithstanding that any such party may be outside the Bailiwick of Guernsey or the European Economic Area; and (v) process its personal data for the Registrar s internal administration. in providing the Registrar with information, it hereby represents and warrants to the Registrar that it has obtained the consent of any data subject to the Registrar and its respective associates holding and using their personal data for the Purposes (including the explicit 88

89 c108323pu060 Proof 3: _12:43 B/L Revision: consent of the data subjects for the processing of any sensitive personal data for the Purposes set out in paragraph (x) above). For the purposes of this document, data subject, personal data and sensitive personal data shall have the meanings attributed to them in the Data Protection Law; (aa) Numis and the Company are entitled to exercise any of their rights under the Placing and Offer Agreement or any other right in their absolute discretion without any liability whatsoever to it; (bb) the representations, undertakings and warranties contained in this Prospectus are irrevocable. It acknowledges that Numis and the Company and their respective affiliates will rely upon the truth and accuracy of the foregoing representations and warranties and it agrees that if any of the representations or warranties made or deemed to have been made by its subscription of the New Ordinary Shares and/or New ZDP Shares are no longer accurate, it shall promptly notify Numis and the Company; (cc) where it or any person acting on behalf of it is dealing with Numis, any money held in an account with Numis on behalf of it and/or any person acting on behalf of it will not be treated as client money within the meaning of the relevant rules and regulations of the Financial Conduct Authority which therefore will not require Numis to segregate such money, as that money will be held by Numis under a banking relationship and not as trustee; (dd) any of its clients, whether or not identified to Numis, will remain its sole responsibility and will not become clients of Numis for the purposes of the rules of the Financial Conduct Authority or for the purposes of any other statutory or regulatory provision; (ee) it accepts that the allocation of New Ordinary Shares and/or New ZDP Shares shall be determined by Numis in its absolute discretion but in consultation with the Company and that Numis may scale down any commitments for this purpose on such basis as it may determine; and (ff) time shall be of the essence as regards its obligations to settle payment for the New Ordinary Shares and/or New ZDP Shares and to comply with its other obligations under the Initial Placing and/or the Placing Programme. 5 United States Purchase and Transfer Restrictions By participating in the Initial Placing and/or the Placing Programme, each Placee acknowledges and agrees that it will (for itself and any person(s) procured by it to subscribe for New Ordinary Shares and/or New ZDP Shares and any nominee(s) for any such person(s)) be further deemed to represent and warrant to each of the Company, the Investment Manager, the Investment Advisers, the Registrar and Numis that: (a) it is not a US Person and, it is acquiring the New Ordinary Shares and/or New ZDP Shares in an offshore transaction meeting the requirements of Regulation S and it is not acquiring the New Ordinary Shares and/or New ZDP Shares for the account or benefit of a US Person; (b) it acknowledges that the New Ordinary Shares and/or New ZDP Shares have not been and will not be registered under the US Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold in the United States or to, or for the account or benefit of, US Persons absent registration or an exemption from registration under the Securities Act; (c) it acknowledges that the Company has not registered under the Investment Company Act and that the Company has put in place restrictions for transactions not involving any public offering in the United States, and to ensure that the Company is not and will not be required to register under the Investment Company Act; (d) unless the Company expressly consents in writing otherwise, no portion of the assets used to purchase, and no portion of the assets used to hold, the New Ordinary Shares and/or New ZDP Shares or any beneficial interest therein constitutes or will constitute the assets of (i) an employee benefit plan as defined in Section 3(3) of ERISA that is subject to Title I of ERISA; (ii) a plan as defined in Section 4975 of the Tax Code, including an individual retirement account or other arrangement that is subject to Section 4975 of the Tax Code; or (iii) an entity which is deemed to hold the assets of any of the foregoing types of plans, accounts or arrangements that is subject to Title I of ERISA or Section 4975 of the Tax Code. In addition, if a Placee is a governmental, church, non-u.s. or other employee benefit 89

90 c108323pu060 Proof 3: _12:43 B/L Revision: plan that is subject to any federal, state, local or non-u.s. law that is substantially similar to the provisions of Title I of ERISA or Section 4975 of the Tax Code, its purchase, holding, and disposition of the New Ordinary Shares and/or New ZDP Shares must not constitute or result in a non-exempt violation of any such substantially similar law; (e) that if any New Ordinary Shares and/or New ZDP Shares offered and sold pursuant to Regulation S are issued in certificated form, then such certificates evidencing ownership will contain a legend substantially to the following effect unless otherwise determined by the Company in accordance with applicable law: ACORN INCOME FUND LIMITED (THE COMPANY ) HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED. IN ADDITION, THE SECURITIES OF THE COMPANY REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. ; (f) (g) (h) (i) (j) if in the future the Placee decides to offer, sell, transfer, assign or otherwise dispose of its New Ordinary Shares and/or New ZDP Shares, it will do so only in compliance with an exemption from the registration requirements of the Securities Act and under circumstances which will not require the Company to register under the Investment Company Act. It acknowledges that any sale, transfer, assignment, pledge or other disposal made other than in compliance with such laws and the above stated restrictions will be subject to the compulsory transfer provisions as provided in the Articles; it is purchasing the New Ordinary Shares and/or New ZDP Shares for its own account or for one or more investment accounts for which it is acting as a fiduciary or agent, in each case for investment only, and not with a view to or for sale or other transfer in connection with any distribution of the New Ordinary Shares and/or New ZDP Shares in any manner that would violate the Securities Act, the Investment Company Act or any other applicable securities laws; it acknowledges that the Company reserves the right to make inquiries of any holder of the New Ordinary Shares and/or New ZDP Shares or interests therein at any time as to such person s status under US federal securities laws and to require any such person that has not satisfied the Company that holding by such person will not violate or require registration under US securities laws to transfer such New Ordinary Shares and/or New ZDP Shares or interests in accordance with the Articles; it acknowledges and understands that the Company is required to comply with FATCA and agrees to furnish any information and documents the Company may from time to time request, including but not limited to information required under FATCA; and it has received, carefully read and understands this Prospectus, and has not, directly or indirectly, distributed, forwarded, transferred or otherwise transmitted this Prospectus or any other presentation or offering materials concerning the New Ordinary Shares and/or New ZDP Shares to within the United States or to any US Persons, nor will it do any of the foregoing. The Company, the Investment Manager, the Investment Advisers, Numis and their respective directors, officers, agents, employees, advisers and others will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgments and agreements. If any of the representations, warranties, acknowledgments or agreements made by the Placee are no longer accurate or have not been complied with, the Placee will immediately notify the Company. 6 Supply and Disclosure of Information If Numis, the Registrar or the Company or any of their agents request any information about a Placee s agreement to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and/or the Placing Programme, such Placee must promptly disclose it to them. 90

91 c108323pu060 Proof 3: _12:43 B/L Revision: 7 Miscellaneous The rights and remedies of Numis, the Registrar and the Company under these terms and conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of one will not prevent the exercise of others. On application, if a Placee is a discretionary fund manager, that Placee may be asked to disclose in writing or orally the jurisdiction in which its funds are managed or owned. All documents provided in connection with the Initial Placing and/or the Placing Programme will be sent at the Placee s risk. They may be returned by post to such Placee at the address notified by such Placee. Each Placee agrees to be bound by the Articles once the New Ordinary Shares and/or New ZDP Shares, which the Placee has agreed to subscribe for pursuant to the Initial Placing and/or the Placing Programme, have been acquired by the Placee. The contract to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and/or the Placing Programme and the appointments and authorities mentioned in this Prospectus and all disputes and claims arising out of or in connection with its subject matter or formation (including non-contractual disputes or claims) will be governed by, and construed in accordance with, the laws of England and Wales. For the exclusive benefit of Numis, the Company and the Registrar, each Placee irrevocably submits to the jurisdiction of the courts of England and Wales and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum. This does not prevent an action being taken against the placee in any other jurisdiction. In the case of a joint agreement to subscribe for New Ordinary Shares and/or New ZDP Shares under the Initial Placing and/or the Placing Programme, references to a Placee in these terms and conditions are to each of the Placees who are a party to that joint agreement and their liability is joint and several. Numis and the Company expressly reserve the right to modify the Initial Placing and/or the Placing Programme (including, without limitation, the timetable and settlement) at any time before allocations are determined. The Initial Placing and/or the Placing Programme is subject to the satisfaction of the conditions contained in the Placing and Offer Agreement and the Placing and Offer Agreement not having been terminated. Further details of the terms of the Placing and Offer Agreement are contained in paragraph 14.1 of Part 9 of this document. 91

92 c108323pu060 Proof 3: _12:43 B/L Revision: PART 12: TERMS AND CONDITIONS OF APPLICATION UNDER THE OFFER FOR SUBSCRIPTION 1 Introduction If you apply for New Ordinary Shares and/or New ZDP Shares under the Offer for Subscription, you will be agreeing with the Company, Numis and the Receiving Agent as set out in this Part Offer to acquire New Ordinary Shares and/or New ZDP Shares under the Offer for Subscription Your application must be made on the Application Form attached at the end of this document or otherwise published by the Company. By completing and delivering an Application Form, you, as the applicant, and, if you complete an Application Form on behalf of another person or a corporation, that person or corporation: 2.1 offer to subscribe for the number of New Ordinary Shares and/or New ZDP Shares specified in section 1 of your Application Form (or such lesser number for which your application is accepted) at the applicable Issue Price on the terms, and subject to the conditions, set out in this document (including this Part 12) and the Memorandum and Articles of Incorporation of the Company; 2.2 agree that, in consideration of the Company and Numis agreeing that they will not, prior to Admission, offer for subscription any New Ordinary Shares and/or New ZDP Shares to any person other than by means of the procedures referred to in this document, your application may not be revoked until after 30 June 2013 and shall not be revoked after Admission and that this paragraph 2.2 shall constitute a collateral contract between you, the Company and Numis which will become binding upon despatch by post to or, in the case of delivery by hand, on receipt by the Receiving Agent of your Application Form; 2.3 warrant that the remittance accompanying your Application Form will be honoured on first presentation and agree that if such remittance is not so honoured you will not be entitled to have any New Ordinary Shares and/or New ZDP Shares applied for in uncertificated form credited to a CREST account or to receive a share certificate for any New Ordinary Shares and/or New ZDP Shares applied for in certificated form or to enjoy or receive any rights in respect of such New Ordinary Shares and/or New ZDP Shares unless and until you make payment in cleared funds for such New Ordinary Shares and/or New ZDP Shares and such payment is accepted by the Receiving Agent (which acceptance shall be in its absolute discretion and on the basis that you indemnify the Company and the Receiving Agent against all costs, damages, losses, expenses and liabilities arising out of or in connection with the failure of your remittance to be honoured on first presentation) and the Company may (without prejudice to any other rights it may have) avoid the agreement to issue such New Ordinary Shares and/or New ZDP Shares and may issue them to some other person(s), in which case you will not be entitled to any refund or payment in respect thereof (other than the refund to you at your risk of any proceeds of the remittance, once honoured, which accompanied your Application Form, without interest); 2.4 agree that the crediting to a CREST account of any New Ordinary Shares and/or New ZDP Shares in uncertificated form to which you may become entitled may be delayed by, and that any share certificate in respect of any New Ordinary Shares and/or New ZDP Shares in certificated form to which you or, in the case of joint applicants, any of the persons specified by you in your Application Form may become entitled and monies returnable may be retained by, the Receiving Agent: (a) pending clearance of your remittance; (b) pending investigation of any suspected breach of the warranties contained in subparagraphs 6.1, 6.2, 6.6, 6.8 or 6.9 of this Part 12 or any other suspected breach of the terms and conditions of application set out in this Part 12; or (c) pending any verification of identity which is, or which the Company and Numis considers may be, required for the purposes of its money laundering obligations under the UK Money Laundering Regulations 2007, the Money Laundering Directive (Council Directive No. 91/308/EEC), the Criminal Justice (Proceeds of Crime) (Financial Services 92

93 c108323pu060 Proof 3: _12:43 B/L Revision: Businesses) (Bailiwick of Guernsey) Regulations 2007 and the Handbook of Financial Services Business (together referred to as the Money Laundering Regulations ) (in each case as amended) and any other regulations applicable thereto; and any interest accruing on such retained monies shall accrue to and for the sole benefit of the Company; 2.5 agree, on the request of the Company and Numis, to disclose promptly in writing to them such information as the Company and Numis may request in connection with your application and authorise the Company, Numis and the Receiving Agent to disclose any information relating to your application which they may consider appropriate; 2.6 agree that, if evidence of identity satisfactory to the Company, and/or the Receiving Agent is not provided to the Receiving Agent within a reasonable time in the opinion of Numis following a request therefor, the Company or Numis may terminate the agreement with you to issue New Ordinary Shares and/or New ZDP Shares and, in such case, the New Ordinary Shares and/or New ZDP Shares which would otherwise have been issued to you may be reissued and your application monies will be returned to the bank or other account on which the cheque or other remittance accompanying the application was drawn, or from which any electronic interbank transfer (CHAPS) was made, without interest and at your risk; 2.7 agree that you are not applying on behalf of a person engaged in money laundering; 2.8 undertake to ensure that, in the case of an Application Form signed by someone else on your behalf, the original of the relevant power of attorney (or a complete copy certified by a solicitor or notary) is enclosed with your Application Form; 2.9 undertake to pay interest at the rate described in paragraph 3.3 of this Part 12 if the remittance accompanying your Application Form is not honoured on first presentation; 2.10 authorise the Registrar to credit the CREST account specified in section 6 of the Application Form with the number of New Ordinary Shares and/or New ZDP Shares for which your application is accepted or, if that section is not completed, send a definitive certificate in respect of the number of New Ordinary Shares and/or New ZDP Shares for which your application is accepted by post to your address (or that of the first-named applicant) as set out in your Application Form and at your risk; 2.11 agree that, in the event of any difficulties or delays in the Admission of the New Ordinary Shares and/or New ZDP Shares to CREST or the use of CREST in relation to the Offer for Subscription, the Company and Numis may agree that all of the New Ordinary Shares and/or New ZDP Shares should be issued in certificated form; 2.12 authorise the Receiving Agent to send a crossed cheque for any monies returnable by post to your address (or that of the first named applicant) as set out in your application form or by payment to the account from which any electronic interbank transfer (CHAPS) was made, without interest and at your risk; 2.13 confirm that you have read and complied with paragraph 8.2 of this Part 12; 2.14 consent to the processing of personal data given in relation to your application and acknowledge and accept that information provided by you to the Company, Receiving Agent or Administrator will be stored on the Receiving Agent s and the Administrator s computer system and manually. You acknowledge and agree that for the purposes of the Data Protection (Bailiwick of Guernsey) Law, 2001, as amended (the Data Protection Law ) and other relevant data protection legislation which may be applicable, the Receiving Agent and the Administrator are required to specify the purposes for which they will hold personal data. The Receiving Agent and the Administrator will only use such information for the purposes set out below (collectively, the Purposes ), being to: (a) (b) process your personal data (including sensitive personal data) as required by or in connection with your holding of New Ordinary Shares and/or New ZDP Shares, including processing personal data in connection with credit and money laundering checks on you; communicate with you as necessary in connection with your affairs and generally in connection with your holding of New Ordinary Shares and/or New ZDP Shares; 93

94 c108323pu060 Proof 3: _12:43 B/L Revision: (c) (d) (e) provide personal data to such third parties as the Administrator or Receiving Agent may consider necessary in connection with your affairs and generally in connection with your holding of New Ordinary Shares and/or New ZDP Shares or as the Data Protection Law may require, including to third parties outside the Bailiwick of Guernsey or the European Economic Area; without limitation, provide such personal data to the Company, Numis, the Investment Manager, the Investment Advisers, the Administrator, the Receiving Agent and their respective associates for processing, notwithstanding that any such party may be outside the Bailiwick of Guernsey or the European Economic Area; and process your personal data for the Administrator s internal administration. In providing the Receiving Agent and the Administrator with information, you hereby represent and warrant to the Receiving Agent and the Administrator that you have obtained the consent of any data subject to the Receiving Agent and the Administrator and their respective associates holding and using their personal data for the purposes (including the explicit consent of the data subject for the processing of any sensitive personal data for the Purposes set out in paragraph 2.14 (a) above). For the purposes of this document, data subject, personal data and sensitive personal data shall have the meanings attributed to them in the Data Protection Law; and 2.15 agree that your Application Form is addressed to the Company and Numis. 3 Acceptance of Applications 3.1 In respect of those New Ordinary Shares and/or New ZDP Shares for which your application has been received and is not rejected, acceptance of your application shall be constituted, at the election of the Company, or Numis on behalf of the Company, either: (i) (ii) by notifying the FCA of the basis of allocation (in which case the acceptance will be on that basis); or by notifying acceptance thereof to the Receiving Agent. 3.2 The basis of allocation will be determined by the Company in consultation with Numis. The right is reserved notwithstanding the basis so determined to reject in whole or in part and/or scale down any application. The right is also reserved to treat as valid any application not complying fully with the terms and conditions of application set out in this Part 12 or not in all respects completed or delivered in accordance with the instructions accompanying the Application Form. In particular, but without limitation, the Company may accept an application made otherwise than by completion of an Application Form where you have agreed with the Company and Numis in some other manner to apply in accordance with the terms and conditions of application in this Part 12. The Company reserves the right (but shall not be obliged) to accept Application Forms and accompanying remittances which are received through the post after a.m. on 23 May The right is reserved to present all cheques for payment on receipt by the Receiving Agent and to retain documents of title and surplus application monies pending clearance of successful applicant s cheques. The Company may require you to pay interest or its other resulting costs (or both) if any cheque accompanying your application is not honoured on first presentation. If you are required to pay interest, you will be obliged to pay the amount determined by the Company to be the interest on the amount of the cheque from the date on which the basis of allocation under the Offer for Subscription is publicly announced until the date of receipt of cleared funds. The rate of interest will be the then published bank base rate of a clearing bank selected by the Company plus 2 per cent. per annum. 3.4 The right is reserved to reject in whole or in part or to scale down or limit, any application. 3.5 The Company reserves the right in its absolute discretion (but shall not be obliged) to accept applications for less than 1,000, or applications which are more than 1,000 but not a multiple of 100 thereafter. 94

95 c108323pu060 Proof 3: _12:43 B/L Revision: 4 Conditions 4.1 The contracts created by the acceptance of applications (in whole or in part) under the Offer for Subscription will be conditional upon: (i) (ii) Admission of the New Ordinary Shares and the New ZDP Shares issued under the Offer for Subscription by 8.00 a.m. on 29 May 2013 (or such later time or date, not being later than 8.00 a.m. on 30 June 2013, as the Company and Numis may agree); and the Placing and Offer Agreement referred to in paragraph 14.1 of Part 9 of this document becoming unconditional and the obligations of Numis thereunder not being terminated. 4.2 You will not be entitled to exercise any remedy of rescission for innocent misrepresentation (including pre-contractual representations) at any time after acceptance. This does not affect any other right you may have. 5 Return of Application Monies If any application is not accepted in whole, or is accepted in part only (as a result of any scaling back of any part of an application), or if any contract created by acceptance does not become unconditional, the application monies or, as the case may be, the balance of the amount paid on application will be returned without interest by returning your cheque, or by crossed cheque in favour of the first-named applicant, by post or by payment to the account from which any electronic interbank transfer (CHAPS) was made, at the risk of the person(s) entitled thereto. In the meantime, application monies will be retained by the Receiving Agent in a separate account. 6 Warranties By completing an Application Form, you: 6.1 warrant that, if you sign the Application Form on behalf of somebody else or on behalf of a corporation, you have due authority to do so on behalf of that other person or corporation and that such other person or corporation will be bound accordingly and will be deemed also to have given the confirmations, warranties and undertakings contained in this Part 12 and undertake to enclose your power of attorney or other authority or a complete copy thereof duly certified by a solicitor or notary; 6.2 warrant that, if the laws of any territory or jurisdiction outside the United Kingdom are applicable to your application, you have complied with all such laws, obtained all governmental and other consents which may be required, complied with all requisite formalities and paid any issue, transfer or other taxes due in connection with your application in any such territory or jurisdiction and that you have not taken any action or omitted to take any action which will result in the Company, the Investment Manager, the Investment Advisers, Numis or the Receiving Agent or any of their respective officers, agents or employees acting in breach of the regulatory or legal requirements, directly or indirectly, of any territory or jurisdiction outside the United Kingdom in connection with the Offer for Subscription in respect of your application; 6.3 confirm that, in making an application, you are not relying on any information or representations in relation to the Company, the New Ordinary Shares and the New ZDP Shares other than those contained in this document (on the basis of which alone your application is made) and, accordingly, you agree that no person responsible solely or jointly for this document or any part of it shall have any liability for any such other information or representation; 6.4 agree that, having had the opportunity to read this document, you shall be deemed to have had notice of all information and representations contained in it; 6.5 acknowledge that no person is authorised in connection with the Offer for Subscription to give any information or make any representation other than as contained in this document and, if given or made, any information or representation must not be relied upon as having been authorised by the Company or Numis; 95

96 c108323pu060 Proof 3: _12:43 B/L Revision: 6.6 warrant that you are not under the age of 18 on the date of your application; 6.7 agree that all documents and monies sent by post to, by or on behalf of the Company, Numis or the Receiving Agent will be sent at your risk and, in the case of documents and returned monies to be sent to you, may be sent to you at your address (or, in the case of joint applicants, the address of the first-named applicant) as set out in your Application Form; 6.8 warrant that you are not applying as, or as nominee or agent of, a person who is or may be a person mentioned in any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipt and clearance services); and 6.9 confirm that you have reviewed the restrictions contained in paragraph 2 of this Part 12 and warrant to the extent relevant, that you (and any person on whose behalf you apply) comply or have complied with the provisions in that paragraph. 7 Money Laundering 7.1 You agree that, in order to ensure compliance with the Money Laundering Regulations, as amended, and any other regulations applicable thereto the Company and/or Numis may, at its/their absolute discretion, require verification of identify from any person lodging an Application Form who either: tenders payment by way of banker s draft or cheque or money order drawn on, or by way of telegraphic transfer or similar electronic means from, an account in the name of another person or persons (in which case verification of your identity may be required); or appears to the Receiving Agent to be acting on behalf of some other person (in which case verification of or identity of any persons on whose behalf you appear to be acting may be required). Failure to provide the necessary evidence or identity may result in application(s) being rejected or delays in the despatch of documents or CREST accounts being credited. Without prejudice to the generality of paragraph 7 of this Part 12, verification of the identity of applicants will be required if the aggregate value of the New Ordinary Shares and New ZDP Shares applied for, whether in one or more applications, exceeds c15,000 (or its Sterling equivalent, being approximately 13,000). If the aggregate value of the New Ordinary Shares and New ZDP Shares which you are applying for, whether in one or more applications, exceeds c15,000 you must ensure that section 8.1, 8.2 or 8.3 (as appropriate) of the Application Form is completed. 8 Overseas Investors The attention of investors who are not resident in, or citizens of, countries other than the United Kingdom and Guernsey is drawn to paragraph 8.1 to 8.4 below: 8.1 The offer of New Ordinary Shares and/or New ZDP Shares under the Offer for Subscription to persons who are resident in, or citizens of, countries other than the United Kingdom and Guernsey may be affected by the law of the relevant jurisdictions. Such persons should consult their professional advisers as to whether they require any government or other consents or need to observe any applicable legal requirements to enable them to subscribe for New Ordinary Shares and/or New ZDP Shares under the Offer for Subscription. It is the responsibility of all such persons receiving this Prospectus and/or wishing to subscribe for New Ordinary Shares and/or New ZDP Shares under the Offer for Subscription, to satisfy themselves as to full observance of the laws of any relevant territory or jurisdiction in connection therewith, including obtaining all necessary governmental or other consents that may be required and observing all other formalities requiring to be observed and paying any issue, transfer or other taxes due in such territories. 8.2 No person receiving a copy of this document in any territory other than the United Kingdom or Guernsey may treat the same as constituting an offer or invitation to him, unless in the relevant territory such an offer can lawfully be made to him without compliance with any further registration or other legal requirements. 96

97 c108323pu060 Proof 3: _12:43 B/L Revision: 8.3 Persons (including, without limitation, nominees and trustees) receiving this Prospectus should not distribute or send it to any US Person or in or into the United States, Canada, Australia, the Republic of South Africa or Japan, their respective territories or possessions or any other jurisdiction where to do so would or might contravene local securities laws or regulations. 8.4 The Company reserves the right to treat as invalid any agreement to subscribe for New Ordinary Shares and/or New ZDP Shares pursuant to the Offer for Subscription if it appears to the Company or its agents to have been entered into in a manner that may involve a breach of the securities legislation of any jurisdiction. 9 Miscellaneous 9.1 To the extent permitted by law, all representations, warranties and conditions, express or implied and whether statutory or otherwise (including, without limitation, pre-contractual representations but excluding any fraudulent representations), are expressly excluded in relation to the New Ordinary Shares, New ZDP Shares and the Offer for Subscription. 9.2 The rights and remedies of the Company, Numis and the Receiving Agent, pursuant to this Part 12 are in addition to any rights and remedies, which would otherwise be available to any of them, and the exercise or partial exercise of one will not prevent the exercise of others. 9.3 The Company reserves the right to delay the closing time of the Offer for Subscription from a.m. on 23 May 2013 by giving notice to the FCA. In this event, the revised closing time will be published in such manner as Numis, in consultation with the Company, determines subject and having regard, to the Listing Rules, the Prospectus Rules and any other requirements of the FCA. 9.4 The Company may terminate the Offer for Subscription in its absolute discretion at any time prior to Admission. If such right is exercised, the Offer for Subscription will lapse and any monies will be returned to you without interest. 9.5 You agree that Numis is acting for the Company in connection with the Offer for Subscription and for no-one else and that Numis will not treat you as its customer by virtue of such application being accepted or owe you any duties concerning the price of New Ordinary Shares and/or New ZDP Shares or concerning the suitability of New Ordinary Shares and/or New ZDP Shares for you or otherwise in relation to the Offer for Subscription, this Prospectus or any other matters referred to in this Prospectus. 9.6 You authorise the Receiving Agent, Numis or any person authorised by them or the Company, as your agent, to do all things necessary to effect registration of any New Ordinary Shares and/or New ZDP Shares subscribed by you into your name(s) and authorise any representatives of the Receiving Agent or of Numis to execute and/or complete any document required therefor. 9.7 You agree that all applications, acceptances of applications and contracts resulting therefrom under the Offer for Subscription (including non-contractual disputes and claims) shall be governed by and construed in accordance with English law and that you submit to the jurisdiction of the English courts and agree that nothing shall limit the right of the Company, Numis or the Receiving Agent to bring any action, suit or proceedings arising out of or in connection with any such applications, acceptances and contracts in any other manner permitted by law or in any court of competent jurisdiction. 9.8 The dates and times referred to in this Part 12 may be altered by the Company so as to be consistent with the Placing and Offer Agreement (as the same may be altered from time to time in accordance with its terms). 9.9 Save where the context requires otherwise, terms used in this Part 12 bear the same meaning as where used elsewhere in this document. 10 Joint Applicants If you make a joint application, you will not be able to transfer your New Ordinary Shares and/or New ZDP Shares into an ISA, SIPPS or SSAS. If you are interested in transferring your New Ordinary Shares and/or New ZDP Shares into an ISA, SIPPS or SSAS, you should apply in your name only. 97

98 c108323pu060 Proof 3: _12:43 B/L Revision: If you do wish to apply jointly, you may do so with up to three other persons. Sections 3 and 4 of the Application Form must be completed by one applicant. All other persons who wish to join in the application must complete and sign section 7 of the Application Form. Another person may sign on behalf of any joint applicant if that other person is duly authorised to do so under a power of attorney. The original of the relevant power of attorney (or a complete copy certified by a solicitor or notary) must be enclosed for inspection. Certificates, cheques and other correspondence will be sent to the address set out in the first paragraph of the Application Form. 11 Verification of Identity Section 8 of the Application Form only applies if the aggregate value of the New Ordinary Shares and New ZDP Shares which you are applying for, whether in one or more applications, exceeds c15,000 (or its Sterling equivalent, being approximately 13,000). If section 8 applies to your application, you must ensure that section 8.1, 8.2 or 8.3 (as appropriate) is completed Professional adviser or intermediary You should complete section 8.1 of the Application Form if you are a stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the FSMA or, if outside the United Kingdom, another appropriately authorised independent financial adviser acting on behalf of a client Applicant identity information Section 8.3 of the Application Form need only be completed where the aggregate value of the New Ordinary Shares and New ZDP Shares which you are applying for, whether in one or more applications, exceeds c15,000 (or its Sterling equivalent, being approximately 13,000) and neither sections 8.1 nor 8.2 of the Application Form can be completed. Notwithstanding that the declaration set out in section 8.2 of the Application Form has been completed and signed, the Receiving Agent, Numis and the Company reserve the right to request of you the identity documents listed in section 8.3 of the Application Form and/or to seek verification of identity of each holder and payer (if necessary) from you or their bankers or from another reputable institution, agency or professional adviser in the applicable country of residence. If satisfactory evidence of identity has not been obtained within a reasonable time, your application might be rejected or revoked. Where certified copies of documents are requested in section 8.3 of the Application Form, such copy documents should be certified by a senior signatory of a firm which is either a governmental approved bank, stockbroker or investment firm, financial services firm or an established law firm or accountancy firm which is itself subject to regulation in the conduct of its business in its own country of operation and the name of the firm should be clearly identified on each document certified. 12 Instructions for Delivery of Completed Application Forms Completed Application Forms should be returned, by post to Anson Registrars Limited, Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 3WX, so as to be received by no later than a.m. on 23 May If you post your Application Form, you are recommended to use first class post and to allow at least two Business Days for delivery. Application Forms received after a.m. on 23 May 2013 may be rejected and returned to the first-named applicant. 98

99 c108323pu060 Proof 3: _12:43 B/L Revision: PART 13: DEFINITIONS The following definitions apply throughout this document unless the context requires otherwise: Administrator Anson Fund Managers Limited Admission Admission to Listing and Admission to Trading and a reference to Admission becoming effective is to be construed in accordance with the Listing Rules or the Standards (as applicable) Admission to Listing Admission to Trading AIM Application Form Articles Assumptions Auditors Business Day Calculation Date 22 May 2013 Company Cover Cover Test CREST CREST Regulations Custodian Directors or Board Disclosure and Transparency Rules Discontinuation Resolution EEA Existing Ordinary Shares Existing ZDP Shares FATCA FCA Final Capital Entitlement FSMA the admission to listing on the Official List of the New Ordinary Shares and/or the New ZDP Shares (by way of a premium listing under Chapter 15 of the Listing Rules in the case of the New Ordinary Shares and by way of a standard listing under Chapter 14 of the Listing Rules in the case of the New ZDP Shares) the admission to trading on the London Stock Exchange s main market for listed securities of the New Ordinary Shares and/or the New ZDP Shares the market of that name operated by the London Stock Exchange the application form for use in connection with the Offer for Subscription set out at the end of this document the articles of incorporation of the Company the principal bases and assumptions set out in Part 8 of this document KPMG Channel Islands Limited a day (other than a Saturday or Sunday) on which commercial banks are open for general business in London and Guernsey Acorn Income Fund Limited has the meaning set out in paragraph (2)(a) of Part 9 of this document has the meaning set out in paragraph (2)(a) of Part 9 of this document the system for paperless settlement of trades in listed securities, of which Euroclear UK & Ireland Limited is the operator the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755) (as amended) BNP Paribas Trust Company (Guernsey) Limited the directors of the Company the disclosure and transparency rules made under Part VI of the FSMA (as set out in the FCA Handbook) (as amended) a special resolution to be proposed by the Directors every five years that the Company should cease to continue as presently constituted European Economic Area the Ordinary Shares in issue at the date of this document the ZDP Shares in issue at the date of this document the US Foreign Account Tax Compliance Act the Financial Conduct Authority acting in its capacity as the competent authority for the purposes of Part IV of the FSMA 138 pence per ZDP Share the Financial Services and Markets Act 2000 (as amended) 99

100 c108323pu060 Proof 3: _12:43 B/L Revision: Gross Proceeds Gross Redemption Yield IFRS Income Portfolio Initial Placing and Offer Price per New Ordinary Share Initial Placing and Offer Price per New ZDP Share Initial Placing and Offer Price Initial Placing and Offer Shares Initial Placing Investment Adviser Investment Management Agreement Investment Manager Issue Price Issues Latest Practicable Date Law Listing Principles Listing Rules London Stock Exchange Memorandum of Incorporation NAV or Net Asset Value Net Proceeds the aggregate value of the New Ordinary Shares and/or the New ZDP Shares to be issued or sold pursuant to the Initial Placing and Offer and/or the Placing Programme (as applicable) taken at the Initial Placing and Offer Price or their Placing Programme Price (as applicable) the maximum annualised return, based on the Assumptions, that can be achieved, before taxation, in terms of capital from purchasing a New ZDP Share at the Initial Placing and Offer Price and holding it until the ZDP Repayment Date International Financial Reporting Standards the portfolio of investments of the Company in high income and fixed interest securities and which is managed by Premier Fund Managers Limited the price at which New Ordinary Shares will be issued under the Initial Placing and Offer, being the NAV per Ordinary Share on the Calculation Date the price at which New ZDP Shares will be issued under the Initial Placing and Offer, being pence per New ZDP Share the applicable price at which New Shares will be issued under the Initial Placing and Offer the New Ordinary Shares and/or New ZDP Shares issued pursuant to the Initial Placing and Offer the initial placing of New Ordinary Shares and New ZDP Shares as described in Part 2 of this document Premier Fund Managers Limited, in its capacity as investment adviser to the Income Portfolio or Unicorn Asset Management Limited, in its capacity as investment adviser to the Smaller Companies Portfolio (and together the Investment Advisers ) the investment management agreement dated 11 December 2006 entered into between the Company and the Investment Manager Premier Asset Management (Guernsey) Limited the applicable Initial Placing and Offer Price or the Placing Programme Price, as the case may be the issues of up to 14 million New Ordinary Shares and up to 19 million New ZDP Shares pursuant to the Initial Placing and Offer and the Placing Programme as described in this document 30 April 2013, being the latest practicable date prior to the date of this document for ascertaining certain information contained herein The Companies (Guernsey) Law, 2008, as amended the principles set out in Chapter 7 of the Listing Rules the rules and regulations made by the FCA under Part VI of the FSMA London Stock Exchange plc the memorandum of incorporation of the Company net asset value calculated in accordance with the Company s normal accounting policies the aggregate value of the New Ordinary Shares and/or the New ZDP Shares to be issued or sold pursuant to the Issues taken at 100

101 c108323pu060 Proof 3: _12:43 B/L Revision: New Shares New Ordinary Shares New ZDP Shares Numis Offer or Offer for Subscription Official List Ordinary Shareholders Ordinary Shares Overseas Persons Placees the Initial Placing and Offer Price or their Placing Programme Price (as applicable) less any expenses New Ordinary Shares and/or New ZDP Shares (as applicable) New Ordinary Shares to be issued pursuant to the Issues New ZDP Shares to be issued pursuant to the Issues Numis Securities Limited the offer for subscription of New Ordinary Shares and New ZDP Shares at the Initial Placing and Offer Price as described in this document the Official List of the FCA holders of Ordinary Shares the ordinary shares of 1 penny each in the capital of the Company (including the New Ordinary Shares where the context requires) persons resident in, or citizens of, jurisdictions other than the United Kingdom and the Channel Islands the persons with whom the New Ordinary Shares and/or New ZDP Shares are placed pursuant to the Issues Placing and Offer Agreement the placing agreement entered into between Numis, the Investment Advisers and the Company in relation to the Issues Placing Programme the placing of New Ordinary Shares and New ZDP Shares as described in Part 3 of this document Placing Programme Price the applicable price at which New Shares will be issued under the Placing Programme, which will be determined as explained in Part 3 of this document Placing Programme Price per New Ordinary Share Placing Programme Price per New ZDP Share the price at which New Ordinary Shares will be issued under the Placing Programme, which will be determined as explained in Part 3 of this document the price at which New ZDP Shares will be issued under the Placing Programme, which will be determined as explained in Part 3 of this document Portfolios together the Income Portfolio and the Smaller Companies Portfolio and each a Portfolio Prospectus this document Prospectus Directive Directive 2003/71/EC, as amended Prospectus Rules rules published by the FCA under section 73A of the FSMA Receiving Agent Anson Registrars Limited Registrar Anson Registrars Limited Responsible Persons the Company and the Directors RIS Regulatory Information Service SDRT stamp duty reserve tax Shares Ordinary Shares and ZDP Shares (including the New Ordinary Shares and the New ZDP Shares where the context requires) Securities Act the United States Securities Act of 1933 (as amended) Smaller Companies Portfolio the portfolio of investments of the Company in equities of companies with a market capitalisation of under 1 billion and which is managed by Unicorn Asset Management Limited Standards the Admission and Disclosure Standards of the London Stock Exchange dated 6 June 2011 Takeover Code the City Code on Takeovers and Mergers 101

102 c108323pu060 Proof 3: _12:43 B/L Revision: UK Corporate Governance Code UK or United Kingdom US or United States US Person The UK Corporate Governance Code as published by the UK Financial Reporting Council the United Kingdom of Great Britain and Northern Ireland United States of America, its territories and possessions, any state of the United States and the District of Columbia has the meaning given to it in Regulation S under the Securities Act ZDP Repayment Date 31 January 2017 ZDP Shareholders holders of ZDP Shares ZDP Shares the redeemable zero dividend preference shares of 1 penny each in the capital of the Company (including the New ZDP Shares where the context requires) In this document words denoting any gender include both genders (unless the context otherwise requires). 102

103 % APPLICATION FORM ACORN INCOME FUND LIMITED (the Company ) Please send the completed form, by post or by hand (during normal business hours only), to Anson Registrars Limited, Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 3WX so as to be received by no later than a.m. on 23 May Important Before completing this form, you should read the accompanying notes. All applicants must complete Boxes 1 to 4 and Box 8 and enclose payment. Box 6 should only be completed if you wish to hold your New Shares in uncertificated form. Box 7 should only be completed by joint applicants. If you have a query concerning completion of this Application Form please call Anson Registrars Limited on (01481) from within the UK or on +44 (0) if calling from outside the UK. Calls to these numbers are charged at standard rates. Lines are open from 9.00 a.m. to 5.00 p.m. (London time) Monday to Friday (excluding public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Anson Registrars Limited cannot provide advice on the merits of the Offer for Subscription or give any financial, legal or tax advice. 1. Application I/We offer to subscribe for: of New Ordinary Shares of New ZDP Shares Total (minimum total 1,000 and thereafter in multiples of 100) fully paid, subject to the Terms and Conditions of Application under the Offer for Subscription set out in the Prospectus dated 8 May 2013 and subject to the memorandum and articles of incorporation of the Company. 2. Amount payable I/We attach a cheque or banker s draft for the amount payable of: (minimum total 1,000 and thereafter in multiples of 100) OR I/We have paid by CHAPS the amount payable being: (minimum total 1,000 and thereafter in multiples of 100) 3. Personal details (PLEASE USE BLOCK CAPITALS) Mr, Mrs, Miss or title Surname Address (in full) Postcode Forenames (in full) Daytime telephone no. 103

104 4. Signature I/We hereby confirm that I/We have read the Prospectus and make this application on and subject to the Terms and Conditions of Application under the Offer for Subscription set out in the Prospectus. Signature Dated Cheque/banker s draft/chaps details Attach your cheque or banker s draft for the exact amount shown in Box 2 made payable to Anson Registrars Limited re Acorn Income Fund Limited Offer for Subscription a/c and crossed a/c payee or make the payment of the amount shown in Box 2 by BACS to the following bank account: Account name: Anson Registrars Limited Acc Re Acorn Income Fund Account number: Sort code: IBAN: GB35RBOS Please quote the name of the applicant (surname if an individual) as a reference. 6. New Shares in uncertificated form (CREST) Complete this section only if you require your New Shares to be credited to a CREST account in the same name as the applicant. CREST Participant ID: (no more than five characters) CREST Member Account ID: (no more than eight characters) CREST Participant s Name: Box 7 must only be completed by joint applicants (see note 7). 7. Joint applicants (PLEASE USE BLOCK CAPITALS) Mr, Mrs, Miss or Title Forenames (in full) Surname Address Signature 8. Verification of Identity If the value of the New Shares which you are applying for, whether in one or more applications, exceeds e15,000 (or its Sterling equivalent, being approximately 13,000), you must ensure that section 8.1, 8.2 or 8.3 (as appropriate) is completed. 8.1 Professional Advisers and Intermediaries This section 8.1 should be completed if an application for New Shares is being made on behalf of a client by a stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 or, if outside the United Kingdom, another appropriately authorised independent financial adviser. (Name of professional adviser or intermediary, in full) (Address, in full) (Post code) (Contact name) (Telephone number) 104

105 % Declaration by the professional adviser or intermediary: To: Acorn Income Fund Limited, Anson Registrars Limited and Numis Securities Limited We are a financial adviser authorised under the Financial Services and Markets Act 2000 applying for New Shares on behalf of one or more clients ( relevant clients ). As such, we hereby undertake to: complete anti-money laundering verification of all relevant clients and to inform you of any unsatisfactory conclusion in respect of any such client; keep records to verify the name, identity, place of birth, residential address, occupation and signature of each relevant client; and supply copies of any such records to you as you may require. We are governed in the conduct of our investment business and in respect of conducting antimoney laundering verification by the following regulatory or professional body (and our reference or other official number allocated to us by that body is included in the box below). (Full name and country of operation of regulatory or professional body) (Reference or other official number) If you require further information about our procedures or any of our relevant clients, please contact the person named as the contact in the first box in this section 8.1. (Date) 2013 (Official stamp, if any) (Signature) (Full name) (Title/position) 8.2 Reliable Introducer If you are not a professional adviser or intermediary to whom section 8.1 applies, completion and signing of declaration in this section 8.2 by a suitable person or institution may avoid presentation being requested of the identity documents detailed in section 8.3 of this form. The declaration below may only be signed by a person or institution (such as a governmental approved bank, stockbroker or investment firm, financial services firm or an established law firm or accountancy firm) (the firm ) which is itself subject in its own country to the operation of know your customer and anti-money laundering regulations no less stringent than those which prevail in Guernsey. Acceptable countries include Austria, Belgium, Denmark, Finland, France, Germany, Gibraltar, Greece, Jersey, Hong Kong, Iceland, Isle of Man, Italy, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland and the United Kingdom. Declaration by the firm To: Acorn Income Fund Limited, Anson Registrars Limited and Numis Securities Limited With reference to the applicant(s) detailed in section(s) 3 and, in the case of joint applicants, 7 above, all persons signing sections 4 and 7 above and (collectively the relevant persons ), we hereby declare that: we operate in one of the above-mentioned countries and our firm is subject to money laundering regulations under the laws of that country which, to the best of our knowledge, are no less stringent than those which prevail in Guernsey; we are regulated in the conduct of our business and in the prevention of money laundering by the regulatory authority identified below; each of the relevant persons is known to us in a business capacity and we hold valid identity documentation on each of them and we undertake to immediately provide to you copies thereof on demand; 105

106 8.2.4 we confirm the accuracy of the names and residential/business address(es) of the applicant(s) named in sections 3 and, in the case of joint applicants, 7 above and, if details of a CREST account are included in section 6 above, that the owner thereof is the applicant named in section 3 above; having regard to all local money laundering regulations we are, after enquiry, satisfied as to the source and legitimacy of the monies being used to subscribe for the New Shares to which this application relates; and where the payor and applicant(s) are different persons we are satisfied as to the relationship between them and the reason for the payor being different to the applicant(s). The above information is given in strict confidence for your own use only and without any guarantee, responsibility or liability on the part of the firm or its officials. (Date) 2013 (Official stamp, if any) (Signature) (Full name) (Title/position) having authority to bind the firm, the details of which are set out below: (Name of firm, in full) (Address, in full) (Post code) (Contact name) (Telephone number) (Full name of firm s regulatory authority) (Website address or telephone number of regulatory authority) (Firm s registered, licence or other official number) 8.3 Applicant Identity Information Only complete this section 8.3 if your application has a value greater than e15,000 (or its Sterling equivalent, being approximately 13,000) and neither of sections 8.1 and 8.2 can be completed. In accordance with internationally recognised standards for the prevention of money laundering, the relevant documents and information listed on the following page must be provided (please note that the Company, Anson Registrars Limited and Numis Securities Limited reserve the right to ask for additional documents and information). 106

107 % A. For each applicant who is an individual enclose: (i) (ii) (iii) (iv) a certified clear photocopy of one of the following identification documents which bears both a photograph and the signature of the person: (a) current passport; (b) Government or Armed Forces identity card; or (c) driving licence; and certified copies of at least two of the following documents which purport to confirm that the address(es) given in section 3 and, in the case of joint applicants, section 7 is the applicant s residential address: (a) a recent gas, electricity, water or telephone (not mobile) bill; (b) a recent bank statement; (c) a council tax bill; or (d) similar bill issued by a recognised authority; and if none of the above documents show their date and place of birth, enclose a note of such information; and details of the name and address of their personal bankers from which the Receiving Agent or the Company may request a reference, if necessary. B. For each holder being a company (a holder company ) enclose: (i) (ii) (iii) (iv) (v) (vi) (vii) a certified copy of the certificate of incorporation of the holder company; and the name and address of the holder company s principal bankers from which the Receiving Agent or the Company may request a reference, if necessary; and a statement as to the nature of the holder company s business, signed by a director; and a list of the names and residential addresses of each director of the holder company; and for each director provide documents and information similar to that mentioned in A above; and a copy of the authorised signatory list for the holder company; and a list of the names and residential/registered addresses of each ultimate beneficial owner interested in more than 5% of the issued share capital of the holder company and, where a person is named, also enclose the documents and information referred to in C below and, if another company is named (a beneficiary company ), also complete D below. If the beneficial owner(s) named do not directly own the holder company but do so indirectly via nominee(s) or intermediary entities, provide details of the relationship between the beneficial owner(s) and the holder company. C. For each individual named in B(vii) as a beneficial owner of a holder company enclose for each such person documents and information similar to that mentioned in A(i) to (iv) D. For each beneficiary company named in B(vii) as a beneficial owner of a holder company enclose: (i) a certificated copy of the certificate of incorporation of that beneficiary company; and (ii) (iii) a statement as to the nature of that beneficiary company s business signed by a director; and the name and address of the beneficiary company s principal bankers from which the Receiving Agent or the Company may request a reference, if necessary; and (iv) enclose a list of the names and residential/registered address of each beneficial owner owning more than 5% of the issued share capital of that beneficiary company. E. If the payor is not an applicant and is not a bank providing its own cheque or banker s payment on the reverse of which is shown details of the account being debited with such payment enclose: (i) (ii) (iii) if the payor is a person, for that person the documents mentioned in A(i) to (iv); or if the payor is a company, for that person the documents mentioned in B(i) to (vii); and an explanation of the relationship between the payor and the applicant(s). 107 Tick here for documents provided Applicant Payor

108 NOTES ON HOW TO COMPLETE THE APPLICATION FORM Applications should be returned so as to be received by a.m. on 23 May All applicants should read Notes 1-5. Note 6 should be read by applicants who wish to hold their New Shares in uncertificated form. Note 7 should be read by joint applicants. All applicants should read Notes Application Fill in (in figures) the aggregate subscription price for which your application for New Ordinary Shares and/or New ZDP Shares is made. Your application must be for New Shares with a minimum aggregate subscription price of 1,000 or, if for more than 1,000, in multiples of Amount payable Fill in (in figures) the total amount payable for the New Shares for which your application is made. 3. Personal details Fill in (in block capitals) your full name, address and daytime telephone number. If this application is being made jointly with other persons, please read Note 7 before completing Box 3. If you are making this application on behalf of another person or a corporation, that person s or corporation s details should be filled in (in block capitals) in Box Signature The applicant named in Box 3 must date and sign Box 4. The Application Form may be signed by another person on your behalf if that person is duly authorised to do so under a power of attorney. The power of attorney (or a copy duly certified as true by a solicitor or a bank) must be enclosed for inspection. A corporation should sign under the hand of a duly authorised official whose representative capacity should be stated. 5. Cheque/banker s draft/chaps details Attach a cheque or banker s draft for the exact amount shown in Box 2 to your completed Application Form. Your cheque or banker s draft must be made payable to Anson Registrars Limited re Acorn Income Fund Limited Offer for Subscription a/c and crossed a/c payee. Your payment must relate solely to this application. No receipt will be issued. Your cheque or banker s draft must be drawn in Sterling on an account where you have sole or joint title to the funds held at a bank branch in the United Kingdom, the Channel Islands or the Isle of Man and must bear a United Kingdom bank sort code number. Alternatively, you can pay by CHAPS for the exact amount shown in Box 2. Your payment must be made to the following bank account: Account name: Anson Registrars Limited Acc Re Acorn Income Fund Account number: Sort code: IBAN: GB35RBOS Please quote the name of the applicant (surname if an individual) as a reference. No receipt will be issued. Applications with a value of c15,000 (or its Sterling equivalent, being approximately 13,000) or greater, which are to be settled by way of a third party payment (e.g. banker s draft or building society cheque) will be subject to the verification of identity requirements which are contained in the UK Money Laundering Regulations 2007, the Money Laundering Directive (Council Directive No. 91/308/EEC), the Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (Bailiwick of Guernsey) Regulations 2007 and the Handbook of Financial Services Business (together referred to as the Money Laundering Regulations ) (in each case as amended) and any other regulations applicable thereto. This may involve verification of names and addresses (only) through a reputable agency. If satisfactory evidence of identity has not been obtained within a reasonable time, and in any event (unless the Offer for Subscription is extended) by a.m. on 23 May 2013, your application may not be accepted. Certificates, cheques and all other correspondence will be sent to the address in Box New Shares in uncertificated form (CREST) If you wish your New Shares to be issued in uncertificated form you should complete Box 6 in addition to the other parts of the Application Form. 7. Joint applicants If you make a joint application, you will not be able to transfer your New Shares into an ISA. If you are interested in transferring your New Shares into an ISA, the application should be made by you (or on your behalf) in your name only. If you do wish to apply jointly, you may do so with up to three other persons. Boxes 3 and 4 must be completed by one applicant. All other persons who wish to join in the application must complete and sign Box 7. Another person may sign on behalf of any joint applicant if that other person is duly authorised to do so under a power of attorney. The power of attorney (or a copy duly certified as true by a solicitor or a bank) must be enclosed for inspection. Certificates, cheques and all other correspondence will be sent to the address in Box Verification of Identity Section 8 of the Application Form only applies if the aggregate value of the New Shares which you are applying for, whether in one or more applications, exceeds c15,000 (or its Sterling equivalent, being approximately 13,000). If section 8 applies to your application, you must ensure that section 8.1, 8.2 or 8.3 (as appropriate) is completed. 8.1 Professional Adviser or Intermediary You should complete section 8.1 of the Application Form if you are a stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 or, if outside the United Kingdom, another appropriately authorised independent financial adviser acting on behalf of a client. 8.2 Reliable Introducer If you are not a professional adviser or intermediary and the value of your application(s) exceed(s) c15,000 (or its Sterling equivalent, being approximately 13,000), you will be required to provide the verification of identity documents listed in section 8.3 of the Application Form unless you can have the declaration set out in section 8.2 of the Application Form given and signed by a firm acceptable to the Receiving Agent and the Company. Section 8.2 of the Application Form details those firms acceptable to the Receiving Agent and the Company for signing the declaration. In order to ensure their Application Forms are processed timely and efficiently, all applicants who are not professional advisers or intermediaries and to whose applications section 8 of the Application Form applies are strongly advised to have the declaration set out in section 8.2 of the Application Form completed and signed by a suitable firm where possible. 108

109 8.3 Applicant Identity Information Section 8.3 of the Application Form need only be completed where the aggregate value of the New Shares which you are applying for, whether in one or more applications, exceeds c15,000 (or its Sterling equivalent, being approximately 13,000) and neither sections 8.1 nor 8.2 of the Application Form can be completed. Notwithstanding that the declaration set out in section 8.2 of the Application Form has been completed and signed, the Receiving Agent, Numis and the Company reserve the right to request of you the identity documents listed in section 8.3 of the Application Form and/or to seek verification of identity of each holder and payor (if necessary) from you or their bankers or from another reputable institution, agency or professional adviser in the applicable country of residence. If satisfactory evidence of identity has not been obtained within a reasonable time, your application might be rejected or revoked. Where certified copies of documents are requested in section 8.3 of the Application Form, such copy documents should be certified by a senior signatory of a firm which is either a governmental approved bank, stockbroker or investment firm, financial services firm or an established law firm or accountancy firm which is itself subject to regulation in the conduct of its business in its own country of operation and the name of the firm should be clearly identified on each document certified. 9. Instructions for delivery of completed Application Forms Completed Application Forms should be returned, by post or by hand (during normal business hours only), to Anson Registrars Limited, Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 3WX so as to be received by no later than a.m. on 23 May 2013, together in each case with payment in full in respect of the application. If you post your Application Form, you are recommended to use first class post and to allow sufficient time for it to be delivered. Application Forms received after this date may be returned. 109

110 imprima C108323