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Two worlds.Brought together.Investing for social impact and financial return.

SOCIAL IMPACT VCT plc

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This document, comprising a prospectus dated 13 November 2012 in accordance with the Prospectus Rules made under Part VI of the Financial Services and Markets Act 2000 (“FSMA”), has been approved for publication by the Financial Services Authority under section 87 of FSMA and the Prospectus Rules. This document has been prepared for the purposes of complying with the prospectus directive, English law and the rules of the UK Listing Authority and the information disclosed may not be the same as that which would be disclosed if this document had been prepared in accordance with the laws of a jurisdiction outside England.

Social Impact VCT plc (“Social Impact VCT” or the “Company”) and the Directors, whose names appear on page s 24 to 25 , accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

Application will be made to the UK Listing Authority for all the ordinary shares of 10p each in the capital of the Company (“Ordinary Shares”) (issued and to be issued pursuant to the Offer described herein) to be admitted to the Official List of the UK Listing Authority. Application will also be made to the London Stock Exchange for such Ordinary Shares to be admitted to trading on its market for listed securities. It is expected that Admission will become effective, and that trading in the Ordinary Shares will commence, within 3 Business Days of allotment.

Persons receiving this document should note that, in connection with the Offer, Nplus1 Singer Capital Markets Limited (‘‘Singer”) is acting as sponsor for the Company and Marechale Capital Plc (‘‘Marechale”) is acting as promoter to the Offer (and in each case, for no one else) and will not (subject to the responsibilities and liabilities imposed by FSMA or the regulatory regime established thereunder) be responsible to any other person for providing the protections afforded to customers of Singer and Marechale for providing advice in connection with the Offer.

Social Impact VCT plc(Incorporated and registered in England and Wales under the Companies Act 2006 with registered number 7872956)

(ISIN number GB00B7FDZW93)

Offer for Subscription of up to 20,000,000 Ordinary Shares of 10p each in the capital of Social Impact VCT plc at an issue price of 100p per share payable in full on application

Sponsored by

Nplus1 Singer Capital Markets Limited

The Offer is not being made directly or indirectly in or into the United States, Canada, Australia, Japan or South Africa (each a ‘‘Restricted Territory’’). In particular prospective shareholders who are resident in a Restricted Territory should note that this document is being sent for information purposes only. The distribution of this document in jurisdictions other than the UK may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any of these restrictions. Any failure to comply with any of those restrictions may constitute a violation of the securities law of any such jurisdiction. The Application Form is not being, and must not be, forwarded to or transmitted in or into a Restricted Territory. Any person (including without limitation custodians, nominees and trustees) who may have a contractual or legal obligation to forward this document and/or the accompanying Application Form should read the paragraph entitled ‘‘Overseas Investors’’ in paragraph 7 of Part Four of this document before taking any action. 20,000,000 Ordinary Shares are being offered to the public under the Offer. The Offer opens on 13 November 2012 and will be open until 5.00 pm on 5 April 2013 in the case of applications for the 2012/2013 tax year. For the 2013/2014 tax year the Offer will open on 6 April 2013 and close at 5.00 pm on 12 November 2013, unless fully subscribed earlier. The Board reserves the right to close the Offer at a date earlier than 12 November 2013. The Offer is not underwritten. The terms and conditions of the Offer are set out in Part Five of this document together with the Application Form for use in connection with the Offer. The minimum subscription per investor is £2,000 and thereafter in multiples of £1,000. Completed Application Forms should be sent by post or delivered by hand (during normal business hours only) to The City Partnership (UK) Limited, 21-23 Thistle Street, Edinburgh, EH2 1DF. Copies of this document (and any supplementary prospectus published by the Company) are available free of charge for the duration of the Offer by collection from:

FSE C.I.C.Riverside House4 Meadows Business ParkStation Approach, BlackwaterCamberleySurreyGU17 9AB

Nplus1 Singer Capital Markets Limited 1 Bartholomew Lane London EC2N 2AX

Social Finance Limited131-151 Great Titchfield StreetLondonW1W 5BB

The whole of this document should be read. In particular your attention is drawn to “Risk Factors” set out on pages 11 to 13 of this document.

Social Impact VCT plc

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ContentsPage

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

EXPECTED TIMETABLE AND OFFER STATISTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

LETTER FROM THE CHAIRMAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4

INTRODUCTION TO THE IMPACT INVESTMENT MARKET . . . . . . . . . . . . . . . . . . . . . . . . . 1 6

PART ONE: THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9

Introduction to the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9

Tax Benefits for Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9

Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Investment Portfolio and Key Investment Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Social Impact Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2

Investment Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3

Investment Proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4

The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4

The Managers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6

Investment Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4

Investment Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5

Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6

Shareholder Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7

Terms of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8

Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

PART TWO: TAXATION CONSIDERATION FOR INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . 4 1

PART THREE: CONDITIONS TO BE MET BY VENTURE CAPITAL TRUSTS . . . . . . . . . . . 4 3

PART FOUR: ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8

PART FIVE: TERMS AND CONDITIONS OF THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1

APPLICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5

APPLICATION FORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

DIRECTORS, MANAGERS AND ADVISERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1

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SummarySummaries 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 this type of securities and Social Impact VCT. 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 type of securities and Social Impact VCT, 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 WarningA.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 the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled this summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus or it does not provide, when read together with the other parts of the prospectus, key information in order to aid investors when considering whether to invest in such securities.

A.2 Consent for intermediaries.

The Company and the Directors consent to the use of the Prospectus by financial intermediaries, from the date of the Prospectus until the close of the Offer, for the purpose of subsequent resale or final placement of securities by financial intermediaries. The Offer is expected to close in respect of the 2012/2013 tax year at 5.00 pm on 5 April 2013. In respect of the 2013/14 tax year, the Offer will open on 6 April 2013 and close at 5.00 pm on 12 November 2013, subject to the Offer not being fully subscribed at an earlier date. There are no conditions attaching to this consent.

In the event of an offer being made by a financial intermediary, financial intermediaries must give investors information on the terms and conditions of the Offer at the time they introduce the Offer to investors.

Section B – IssuerB.1 Legal and commercial

name.The legal and commercial name of the issuer is Social Impact VCT plc (the “Company”).

B.2 Domicile and legal form. The Company is incorporated as a public limited company and registered in England and Wales under the Companies Act 2006 with registered number 7872956.

B.5 Group. Not applicable: the Company is not part of a group.

B.6 Interests in the Company’s capital and voting rights.

None of the major holders of Ordinary Shares have voting rights different from other holders of Ordinary Shares. Other than the Redeemable Shares (the holders of which have no entitlement to attend or vote at general meetings), the Company has only one class of share and therefore there are no differing rights attaching to any class of share.


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B.7 Historical financial information.

Not applicable: the Company has not commenced operations and no financial statements have been made up as at the date of this document.

B.8 Key pro forma financial information.

Not applicable: the Company has not commenced operations.

B.9 Profit forecasts. Not applicable. There are no profit forecasts or estimates.

B.10 Audit report qualifications.

Not applicable: no audit report has been carried out.

B.11 Working capital. Not applicable: the Company has sufficient working capital for its present requirements.

B.34 Investment objectives and policy.

The investment objective of the Company is to invest in UK companies which make a distinct positive contribution to improving society. Socially - motivated companies will need to demonstrate that they create and sustain measurable social impact on their business area, as well as providing a financial return to VCT investors.

The investment portfolio is to include businesses that create social impact in 4 key areas:

− Building Futures: Engage with people who are marginalised, vulnerable or disadvantaged to build their futures;

− Community Cohesion: Work in local communities to support cohesion and improve access to services and opportunities;

− Socially - motivated Brands: Promote thoughtful consumer brands that create their products and services in an ethical or socially- motivated way; and

− Health and Education: Build human capital by enhancing health and education provision for individuals.

The Company will invest in equity and a mixture of secured and unsecured debt in accordance with the VCT qualifying rules.

However, initially, investor funds will be maintained in low-risk instant access or short term interest bearing deposit accounts with UK registered financial institutions. Whilst suitable Qualifying Investments (that is investments that meet the requirements to enable the Company to qualify as a VCT) are being identified, the Managers may, at their discretion, propose that some funds are invested in money market funds, fixed interest securities or secured loans, including, where feasible, instruments offered or issued by social lenders or socially- motivated companies.

B.35 Borrowing limits. The Board will consider borrowing if it is in the Company’s best interest to do so up to a maximum amount equal to 20% of its net asset value.

B.36 Regulatory status. The Company is a closed ended public limited company. It is not regulated by the Financial Services Authority.

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B.37 Typical investor. A typical investor for whom the Offer is designed is a UK higher rate income taxpayer 18 years of age or over with an investment range of between £2,000 and £200,000 who, having regard to the risk factors set out in this document, considers the investment policy of the Company to be attractive. This may include retail, institutional and sophisticated investors and high net worth individuals who already have a portfolio of non-VCT investments. Investment in a VCT may not be suitable for all investors and should be considered as a long term investment.

B.38 Investments in excess of 20% of Company’s assets.

Not applicable: not more than 20% of the Company’s assets will be invested in a single underlying asset or be exposed to any single counterparty.

B.39 Investments in excess of 40% of Company’s assets.

Not applicable: the Company will not invest in excess of 40% in another collective investment undertaking.

B.40 Service providers and fees.

The Investment Manager and the Investment Adviser will each receive a fixed annual management fee of 1% of the net asset value, subject to a minimum fee of £100,000 each per annum during years 1 to 3 and thereafter subject to a minimum fee of £75,000 each per annum.

Normal annual running costs of the Company such as Directors’ fees, professional fees and the costs incurred by the Company in the ordinary course of business (excluding the management fees described above) are capped at the lower of £ 225,000 per annum or 2.5% of net proceeds (if gross proceeds are at or below £1 5 million) or capped at 1.5% of net proceeds (if gross proceeds are in excess of £1 5 million).

Annual running costs in excess of the above sums will be met by way of a reduction in future Management Fees.

The City Partnership (UK) Limited will provide company secretarial, fund administration services, receiving agent and registrar services to the Company.

B.41 Investment Manager and Adviser.

The Company will be jointly managed by FSE Fund Managers Limited which will be the Company’s Investment Manager and Social Finance Limited which will act as Investment Adviser. Both companies are authorised and regulated by the Financial Services Authority.

B.42 Net Asset Value. The net asset value of the Company will only be audited on an annual basis. The audited full year asset value and the unaudited half-yearly net asset value will be announced through a Regulatory Information Service.

B.43 Umbrella collective investment undertaking.

Not applicable: the Company is not an umbrella collective investment undertaking.

B.44 Financial statements. The Company has not commenced operations and no financial statements have been made up as at the date of this document.

B.45 Portfolio. Not applicable: the Company does not yet have a portfolio.

B.46 Most recent net asset value of security.

Not applicable: there is no recent net asset value for the securities.


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Section C – SecuritiesC.1 The Securities. The Offer consists of Ordinary Shares of GBP £0.10 per

share at an issue price of GBP £1.00 per share. ISIN number GB00B7FDZW93.

C.2 Currency. The currency of the securities is British Pounds.

C.3 Shares in issue and par value.

On incorporation of the Company, two Ordinary Shares of 10p each were taken nil paid by the original subscribers to the Memorandum: John Gregory and Jonathan Roe. To enable the Company to be launched as a VCT, 25,000 redeemable shares were issued to FSE Fund Managers Limited and Social Finance Limited respectively at par for cash, paid up as to one quarter of their nominal value. These shares will be paid up in full and redeemed out of the proceeds of the Offer and the Articles amended by the deletion of all references to Redeemable Shares and attached rights.

C.4 Rights attached to shares. Shareholders shall have the right to receive notice of, attend and vote at all general meetings of the Company.

C.5 Restrictions on transferability.

The Board may refuse to register a transfer of the Ordinary Shares unless: the shares are fully paid up; the transfer is in favour of a single transferee (or not more than four joint transferees); the transfer is properly stamped and it is delivered for registration to the registered office of the Company (or any other place that the Board has directed) accompanied by the relevant share certificate.

C.6 Admission to trading. Following Admission, the Ordinary Shares are to be traded on the London Stock Exchange.

C.7 Dividend policy. The ability to pay dividends and the amount of such dividends depends, amongst other things, on the amount raised by the Offer and the level of income and capital returns generated by the investments. The Board plans to commence paying dividends in respect of the Company’s second financial year although such a payment of dividends and the amount are not guaranteed.

Section D - RisksD. 2 Key risk factors specific

to the Company.There can be no assurances that the Company will meet its objectives, identify suitable investment opportunities or be able to diversify its portfolio. Past performance of the Managers is no guide to future performance and the value of an investment into the Company may fall as well as rise and an investor may not receive back the full amount invested.

There can be no guarantee that the Company will qualify as a VCT, or that such status will be maintained, which could lead to adverse tax consequences for investors, including a requirement to repay the 30% income tax relief.

Investors may find it difficult to realise their investment in the Company and the price at which the Ordinary Shares are traded may not reflect the net asset value of the Company.

The performance of the Company may be difficult to assess due to the frequency of calculation of its net asset value. Prospective investors should be aware that the net asset value of the Company will only be audited on an annual basis.

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If only the Minimum Gross Proceeds of £7.5 million are raised, the ability of the Company to diversify its portfolio may be reduced and potential investors should be aware that the fixed costs of running the Company will be proportionately higher and therefore likely to impact negatively on financial returns to Shareholders. In the event that Social Impact VCT raises substantially less than £20 million, the payment of dividends may be constrained.

The following risk factors may adversely affect the value of and the returns from the investments made by the Company :

− Businesses at an early stage in their development may not have a proven business model and have limited revenue.

− The growth of potential new markets may not be as rapid as the investee company had forecast.

− As a non-controlling investor, the Company may not be in a position to fully protect the interests of Shareholders.

Realisation of investments in unquoted companies can be difficult and may take considerable time. There may also be constraints imposed upon the Company in order to maintain its VCT status and these may restrict the Company’s ability to obtain the maximum value from its investments.

D.3 Key risk factors specific to the securities.

The market price of the Ordinary Shares may not fully reflect the underlying net asset value of the Company and investors may not get back the full amount invested if they sell shares in the market at any time in the future.

Although the Ordinary Shares are to be admitted to the Official List and to trading on the London Stock Exchange’s market for listed securities, VCTs are illiquid and there is only a limited secondary market for their shares primarily because the income tax relief is only available to those subscribing to newly issued shares and the five year holding period required to maintain the income tax relief. Therefore, investors may find it difficult to realise their investment in the Company.

Section E - OfferE.1 Net proceeds and total

expenses. The Company is seeking to raise up to £20 million through the Offer.

Costs in relation to the Offer will be capped at an amount equal to 5.5% of the gross proceeds of the Offer. This cap will include any permissible initial intermediary commissions and promoter costs.

Marechale Capital Plc, an investment banking and corporate finance business, will act as promoter to the Offer in return for a fee of 1.5% of the gross funds raised up to £7 million and 2% of the gross funds raised in respect of the portion of gross funds raised in excess of £7 million. In each case this will exclude any gross funds committed by an institutional investor or by designated investors introduced to the VCT via the Managers.


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Authorised financial intermediaries will, where permissible, usually be entitled to receive an initial commission of 3% on the amount invested by their client. From 31 December 2012 changes introduced by the Retail Distribution Review (RDR) will determine whether commission may be paid by the VCT to a financial intermediary who has given advice. So any application in respect of shares allotted on or after 31 December 2012 will have the RDR rules applied concerning initial commission.

Financial intermediaries may agree to waive their initial commission in respect of an application. If this is the case, the number of shares allotted to the investor will be increased by 1 Ordinary Share for every £1 of commission waived. No further fees or commission will be paid in respect of such additional Ordinary Shares.

The Company may (subject to agreement with the Managers) change the availability and terms of initial commission applicable to applications received on or after a specified date payable to financial intermediaries through an announcement to the London Stock Exchange via a Regulatory Information Service provider authorised by the FSA. The Company may also provide or publish an amended application form to that set out in this document pursuant to which applications for Ordinary Shares under the Offer will be accepted.

E.2a Use of net proceeds. It is intended that the proceeds of the Offer will be used by the Company in accordance with its investment policy and to redeem the Redeemable Shares. It is expected that the net proceeds received under the Offer, assuming full subscription and costs of 5.5%, will be £18.9 million. If the Minimum Gross Proceeds of £7.5 million are obtained, the net proceeds will be £7.09 million.

E.3 Terms and conditions of Offer.

The Offer opens on 13 November 2012 and will be open until 5.00 p m on 5 April 2013 in the case of applications for the 2012/2013 tax year. For the 2013/2014 tax year the Offer will open on 6 April 2013 and close at 5.00 p m on 12 November 2013 unless fully subscribed earlier. Applicants will receive share and tax certificates in respect of the Ordinary Shares allotted to them.

In the event of the Minimum Gross Proceeds not being reached by 5 April 2013, the applicant can have his/her application for the 2012/2013 tax year rolled over to the 2013/2014 tax year by providing consent in the Application Form. In the event of the Minimum Gross Proceeds not being reached by 12 November 2013, the Offer will lapse and applications monies which have been received will be returned without interest. The Board reserves the right to close the Offer at a date earlier than 12 November 2013.

The Company reserves the right (subject to agreement with the Managers) to lower the Minimum Gross Proceeds to no less than £6 million. Such a decision would be made public through publication of a supplementary prospectus.

In the event that the Offer is oversubscribed, allotment will generally be made to investors on a first come, first served basis.

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The Ordinary Shares will be issued on a fully paid up basis in registered form when the Minimum Gross Proceeds have been received and, after that, on a monthly basis.

The minimum subscription under the Offer will be £2,000 and, above that, in multiples of £1,000. The maximum investment in VCTs on which income tax relief can be claimed is £200,000 in each of the 2012/2013 and 2013/2014 tax years.

Applicants whose Application Form is received by 5.30 pm on 21 December 2012 will be entitled to 10 additional Ordinary Shares for every £1,000 subscribed.

E.4 Material interests and conflicting interests.

On incorporation of the Company, two Ordinary Shares of 10p each were taken nil paid by the original subscribers to the Memorandum: John Gregory and Jonathan Roe. To enable the Company to be launched as a venture capital trust, 25,000 redeemable shares were issued to FSE and Social Finance respectively at par for cash, paid up as to one quarter of their nominal value. These shares will be paid up in full and redeemed out of the proceeds of the Offer and the Articles amended by the deletion of all references to Redeemable Shares and attached rights.

E.5 Persons offering to sell securities.

Not applicable: no person or entity is offering to sell the securities.

E.6 Dilution. Not applicable: there will be no dilution resulting from the Offer.

E.7 Expenses charged to investors.

For an investor under the Offer who is advised by a financial adviser on or prior to 30 December 2012, the costs of the Offer will be a maximum of 5.5% of the value of the subscription monies received by the Company in respect of that investor’s application, out of which a 3% commission is payable to the investor’s financial adviser, unless the financial adviser elects that such commission is re-invested for the benefit of the investor.

For an investor under the Offer who is advised by a financial adviser after 30 December 2012, at the request of an investor the Company will facilitate the payment of that investor’s adviser’s charge as agreed by that investor and his financial adviser (such charges being equal to or less than the charges that would otherwise have been made on or prior to 30 December 2012), which will be paid out of the monies received by the Company from an investor, with the balance of such monies used by way of subscription monies. In such circumstances, the costs of the Offer will be a maximum of 5.5% of the value of the subscription monies received by the Company in respect of that investor’s application.

For an investor under the Offer who is not advised by a financial adviser, the costs of the Offer will be a maximum of 5.5% of the value of the subscription monies received by the Company in respect of that investor’s application.

There is no trail commission payable.

Investors will receive Ordinary Shares under the Offer in respect of the gross value of their subscription proceeds, prior to any deduction on account of the above expenses.


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Expected Timetable and Offer Statistics Expected timetableOffer opens 13 November 2012First allotment as soon as the Minimum Gross Proceeds of £7.5 million is reached First admission within 3 Business Days of the first allotment Subsequent allotments Monthly Dealings commence within 3 Business Days of each allotment Share and tax certificates sent out within 10 Business Days of each allotment Deadline for receipt of applications entitled to receive 10 additional Ordinary Shares for every £1,000 subscribed 5.30 pm on 21 December 2012 Deadline for receipt of applications for the 2012/2013 tax year 5.00 pm on 5 April 2013 Deadline for receipt of applications for the 2013/2014 tax year 5.00 pm on 12 November 2013

The deadline for receipt of applications is subject to the Offer not being fully subscribed by an earlier date. In the event of the Minimum Gross Proceeds not being reached by 12 November 2013, the offer will lapse and applications monies which have been received will be returned without interest. The Board reserves the right to close the Offer at a date earlier than 12 November 2013. Details of allotments will be announced through a Regulatory Information Service provider by no later than the end of the Business Day following the allotment. The Directors reserve the right to allot and issue Ordinary Shares at any time whilst the Offer remains open. Definitive share and tax certificates will be despatched as soon as practicable following allotment of Ordinary Shares.

Additional Shares for early investmentApplicants whose Application Form is received by 5.30 pm on 21 December 2012 will be entitled to 10 additional Ordinary Shares for every £1,000 subscribed.

Offer statistics*Offer Price per Ordinary Share 100p

Maximum number of Ordinary Shares in issue following the Offer 20,000,000

Minimum number of Ordinary Shares in issue following the Offer 7,500 ,000

Initial Net Asset Value per Ordinary Share 94.5p

Maximum net proceeds of the Offer, after issue costs, at full subscription* £18.9 million

Maximum expenses of the Offer £1.1 million * taking into account maximum expenses of the Offer of 5.5p per Ordinary Share. Not taking into account the effects of any Ordinary Shares issued under the early investment incentive or as a consequence of permissible initial intermediary commissions having been waived.

Costs and commissions related to the OfferOffer costs as a percentage of the gross proceeds ** 5.5%

Commission to intermediaries *** 3.0%** Offer costs as a percentage of gross proceeds are capped at 5.5%.

*** payable by the Company within the Offer costs of 5.5%. Financial intermediaries may waive part of or all of their commission in respect of applications for the Offer. If this is the case, the number of Ordinary Shares allotted to the investor will be increased by 1 Ordinary Share for every £1 of commission waived. From 31 December 2012 changes introduced by the Retail Distribution Review (RDR) will determine whether commission may be paid by the VCT to a financial intermediary who has given advice. Any application in respect of a personal recommendation provided to an investor by a financial intermediary after 30 December 2012 will have the RDR rules applied concerning initial commission.

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Risk FactorsProspective investors should consider carefully the following risk factors in addition to the other information presented in this document and the Prospectus as a whole. If any of the risks described below were to occur it could have a material effect on the Company’s business, financial condition, result of operations or on the value of the Ordinary Shares. The risks and uncertainties described below are not the only ones the Company, the Directors or investors in the Ordinary Shares will face. Additional risks not currently known to the Company or the Directors or that the Company or the Directors currently believe are not material may also adversely affect the Company’s business, financial condition and result of operations. The value of the Ordinary Shares could decline due to any of these risk factors described below and investors could lose part or all of their investment. Investors who are in doubt should consult their independent financial adviser.

Having regard to the investment objectives of the Company, the conditions upon which the tax reliefs are available and the planned 8 year life for Social Impact VCT, an investment in the Company should be considered as a long term investment. Investing in the Company carries particular risks. All material risk factors are set out below:

Risks related to the Offer − The Offer is conditional on receiving applications for Ordinary Shares representing in aggregate

Minimum Gross Proceeds of £7.5 million. The Company reserves the right (subject to agreement with the Managers) to lower the Minimum Gross Proceeds to no less than £6 million. Such a decision would be made public through publication of a supplementary prospectus. In the event of the Minimum Gross Proceeds not being reached by 5 April 2013, the applicant can have his/her application for the 2012/2013 tax year rolled over to the 2013/2014 tax year by providing consent in the Application Form. In the event of the Minimum Gross Proceeds not being reached by 12 November 2013, the Offer will lapse and applications monies which have been received will be returned without interest. The Board reserves the right to close the Offer at a date earlier than 12 November 2013.

− The market price of the Ordinary Shares may not fully reflect the underlying net asset value of the Company and investors may not get back the full amount invested, if they sell shares in the market at any time in the future. The value of any income derived from Ordinary Shares depends on the performance of the underlying assets of the Company and the dividend and interest income derived therefrom, less the costs of establishing and running the Company. The value of investments and the dividend stream can rise and fall and an investor in the Company may not get back the full amount invested at the end of its planned 8 year life.

− Although the Ordinary Shares are to be admitted to the Official List and to trading on the London Stock Exchange’s market for listed securities, VCTs are inherently illiquid and there is only a limited secondary market for their shares primarily because the income tax relief is only available to those subscribing for newly issued shares and the five year holding period required to maintain the income tax relief. Consequently investors may find it difficult to realise their investment in the Company.

− The performance of the Company may be difficult to assess due to the frequency of calculation of its net asset value. Prospective investors should be aware that the net asset value of the Company will only be audited on an annual basis. The audited full year net asset value and the unaudited interim net asset value will be announced through a Regulatory Information Service.

− The Company is seeking to raise up to £20 million under the Offer. Should only the Minimum Gross Proceeds of £7.5 million be raised, the portfolio of investments will be less diversified than it would have been had the maximum amount sought under the Offer been raised, and potential investors should be aware that the fixed costs of running the Company will be proportionately higher and, therefore, a lower proportion of the applicant’s monies will be available to be invested in accordance with the stated investment policy as set out in Part One of this document. In the event that Social Impact VCT raises substantially less than £20 million, the payment of dividends may be constrained.


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General risks − The investment track record of the Managers is not an indication of the future financial

performance of the Company.

− There can be no assurance that the Company will be able to make suitable investments that are compatible with its VCT status or be able to diversify its portfolio.

− Social Impact VCT will focus on investing in socially-motivated companies which are managed based on solid commercial skills and discipline, whilst simultaneously maintaining their stated social mission. Whilst it is not envisaged that investments in socially-motivated companies will be higher risk than investments in purely commercial companies, it is possible that government policy changes may impact on socially-motivated companies more than purely commercial companies. It is also possible that there may be circumstances under which the set of key risks and opportunities faced by socially-motivated companies are different to those faced by purely commercial companies. For example, a socially-motivated company with a social mission to provide affordable services to lower income households may be more constrained in its ability to raise prices to consumers than purely commercial companies.

− In August 2012, the FSA published a consultation paper (CP 12/19) on “Restrictions on the retail distribution of unregulated collective investment schemes and close substitutes”. The paper sets out proposals to ban the promotion of unregulated collective investment schemes (UCIS) and similar funds to ordinary retail investors in the UK. If these proposals are implemented, VCTs could only be promoted to sophisticated investors and high net worth individuals. Promotion to retail investors would be severely restricted. In September 2012, the Association of Investment Companies called upon the FSA to exclude VCTs from the proposals in the same way that investment trusts have been excluded. A ban on the promotion of VCTs to retail investors may limit the Company’s ability to raise the Minimum Gross Proceeds.

Market risks − Investment by the Company in unquoted companies, AIM traded and PLUS Market traded

companies by its nature involves a higher degree of risk than investment in companies traded on the main market of the London Stock Exchange. In particular, markets for smaller companies, where they may exist, may not be regulated and are often less liquid and there may be difficulties in valuing and disposing of investments in such companies. In addition, such companies and smaller companies generally may have limited product lines, markets or financial resources and may be more dependent on their management or key individuals than larger companies.

− The following risk factors may adversely affect the value of, and the returns from, the investments made by the Company and, as a result, the value of, and the returns from the Ordinary Shares being reduced or lost:

− Early stage businesses may not have proven their business model and may have limited revenue at the time of investment and investing in them may, therefore, involve greater risk than investing in companies at a more advanced stage of development;

− The growth of potential new markets may not be as rapid as forecasted by an investee company, resulting in its failure to exploit an opportunity;

− Although the Company may receive certain conventional venture capital rights in connection with the Company’s investments, as a non-controlling investor it may not be in a position to fully protect the interests of Shareholders; and

− Realisation of investments in unquoted companies can be difficult and may take considerable time. There may also be constraints imposed upon the Company with respect to such realisations in order to maintain its VCT status which may restrict the Company’s ability to obtain the maximum value from its investments.

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Tax related risks − Whilst it is the intention of the Directors that Social Impact VCT will be managed so as to qualify

as a VCT, there can be no guarantee that the Company will qualify as a VCT or that such status will be maintained. A failure to meet the qualifying requirements (for example there is a requirement to have invested at least 70% of the Company’s investments (including cash) into Qualifying Investments by approximately three years following the first issue of shares by the Company) could result in the Company and/or investors losing the tax reliefs previously or prospectively obtained, resulting in adverse tax consequences for investors, including a requirement to repay the upfront 30% income tax relief and loss of exemption from capital gains tax for the Company.

− Levels and bases of, and relief from, taxation are subject to change. Such changes could be retrospective. The tax reliefs described are based on current legislation, practice and interpretation and the value of tax reliefs depends upon personal circumstances.

− Investors should be aware that the sale of Ordinary Shares within five years of their subscription will require repayment of the upfront income tax relief of up to 30% available upon investment. Accordingly, investment in Social Impact VCT should be viewed as a longer term investment.

− Investors must follow certain simple steps to receive the income tax relief, however, it is possible for investors to lose their tax reliefs by not taking these steps.

− In order to retain its VCT status, Social Impact VCT must invest in companies with gross assets of not more than £ 15 million prior to investment or £ 16 million thereafter . Individually, such companies generally have a higher risk profile than larger companies.

− Changes in legislation, concerning VCTs in general and qualifying holdings and qualifying trades in particular, may limit the Company in terms of the number of new Qualifying Investment opportunities available to it and/or reduce the level of returns which would otherwise have been achievable by the Company and/or its ability to achieve or maintain VCT status.

− Any change of governmental, economic, fiscal, monetary or political policy could materially affect, directly or indirectly, the operation of the Company and/or its ability to achieve or maintain final VCT status.


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Letter from the Chairman Social Impact VCT plc

55 Colmore RowBirmingham

West MidlandsB3 2AS

(Registered number 7872956)

13 November 2012

Dear Investor

I am delighted to be writing to you as Chairman of Social Impact VCT plc. The Company will provide the first, diversified, professionally managed, fully listed, investment vehicle for individuals who want to invest in businesses that have the objective of making a social impact, whilst delivering a financial return from their activities. The Company will be managed jointly by FSE Fund Managers Limited and Social Finance Limited . FSE Fund Managers Limited will act as Social Impact VCT’s Investment Manager and will focus on preparing investment recommendations for the investment committee and subsequent investment execution and commercial performance monitoring. Social Finance Limited will act as Social Impact VCT’s Investment Adviser and focus on deal origination, including the identification of potential investments which are compatible with Social Impact VCT’s investment policy, and on social impact monitoring.

INVESTING FOR THE BENEFIT OF UK SOCIETYSocial Impact VCT seeks to support the growth of an emerging type of business – th at driven by a strong social purpose whilst at the same time generating robust financial returns. The Social Impact VCT provides investors with an opportunity to invest “with both their heads and their hearts” in a tax advantaged investment vehicle.

The VCT is expected to be an 8 year, planned exit, specialist VCT investing by way of secured or unsecured debt and equity instruments in UK companies which make a distinct positive contribution to improving society. Building on 4 pillars of social impact, it will target companies which:

1. Building Futures: Engage with people who are marginalised, vulnerable or disadvantaged to build their futures;

2. Community Cohesion: Work in local communities to support cohesion and improve access to services and opportunities;

3. Socially -Motivated Brands: Promote thoughtful consumer brands that create their products and services in an ethical or socially-motivated way; and

4. Health and Education: Build human capital by enhancing health and education provision for individuals.

Social Impact VCT will constitute a pool of capital readily available for immediate deployment into socially- motivated companies. Social Impact VCT will work with the investee companies with the intention of establishing a set of meaningful and timely outcome measurements that are individual to each investment. Shareholders will be provided with an annual Social Impact Report describing the impact generated by the investee companies. It is also intended that there would be the opportunity for Shareholders to meet the management of investee companies at the annual general meeting of the Company.

SUBSTANTIAL TAX BENEFITSThe Company provides qualifying investors with access to the tax benefits associated with an investment in a VCT:

1. up to 30% income tax relief on amounts subscribed in each of the 2012/2013 and 2013/2014 tax years. The tax relief is in respect of UK tax paid and/or payable by the investor in the tax year that the relevant subscription for VCT shares is made and, is not dependent on the investor’s marginal rate of UK tax, but is subject to a maximum investment in VCTs of £200,000 in one tax

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year and an investor’s tax liability being reduced to a minimum of nil and is repayable to HMRC if the Ordinary Shares are held by the investor for less than 5 years; and

2. tax free distributions and capital gains (subject to the annual investment limits).

EXPECTED RETURNS OF THE 8 YEAR, PLANNED EXIT VCTThe underlying investment portfolio is anticipated to provide qualifying investors with the following:

1. The ability to support the growth of enterprises that make a distinct positive contribution to improving UK society as evidenced through the Social Impact Report and the opportunity to meet with the management of investee companies;

2. Capital preservation due to a focus on investment in social enterprises and socially- motivated companies, which are either established and seeking to expand their geographic or product reach, or whose revenue streams are expected to be underpinned wholly or partially by confirmed delivery contracts. In many cases, it is expected that investment will be held for a 5 year period, structured with a mix of debt and equity, under which the majority of the return will be linked to the debt instrument, which will have a finite life to facilitate Social Impact VCT’s exit from the investment;

3. Return of capital in Years 6, 7 and 8;

4. Dividends planned in respect of the second financial year of the Company onwards (although the payment of dividends may be constrained in the event that Social Impact VCT raises substantially less than £20 million); and

5. In the context of a £20 million fund, an Annualised Return of 2 – 3% post costs and before taking account of any tax benefit an investor may receive. The Company’s illustrative portfolio indicates for a UK tax paying investor a total target return on an investment in the Company after 8 years of 118.5 p (tax free) on every 70p invested (100p gross less 30p VCT income tax relief).

THE OFFERThe Offer opens on 13 November 2012 and will be open until 5.00 pm on 5 April 2013 in the case of applications for the 2012/2013 tax year. For the 2013/2014 tax year the Offer will open on 6 April 2013 and close at 5.00 pm on 12 November 2013, unless fully subscribed earlier.

The Offer is for up to 20,000,000 Ordinary Shares, being offered at 100p per Ordinary Share payable in full on application. Applicants whose Application Form is received by 5.30 pm on 21 December 2012, whether applying through an intermediary or directly, will be entitled to 10 additional Ordinary Shares for every £1,000 subscribed.

NEXT STEPSIn order to invest, please read the Prospectus in full and then complete the Application Form, which is at the end of this document. If you have any questions regarding Social Impact VCT, you should contact your financial adviser or call the Promoter Marechale Capital Plc on 0207 628 5582 . Please note that Marechale Capital Plc is not able to provide you with investment, financial or tax advice and your attention is also drawn to the Risk Factors on pages 11 to 13 .

I am particularly grateful to the range of experienced individuals who have joined together to launch this exciting and timely initiative.

I look forward to welcoming you as a Shareholder.

Yours faithfully

John GregoryChairman


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Introduction to the Impact Investment MarketThere has been a shift in the provision of social welfare from governments to socially-motivated companies. Many such companies are professionally managed and have been successful in generating commercial revenue and viable income models but, in order to expand, they need growth capital. However, many socially-motivated companies are constrained by the way they were initially financed, either by way of grant finance or loans. Equity and equity-like finance is particularly scarce. Impact investment can provide a long term commitment to the success of socially-motivated enterprises whose business models enable the use of repayable capital.

WHAT IS IMPACT INVESTMENT?Impact investment places capital in businesses and funds that generate social and/or environmental good. Impact investment can provide a range of financial returns to the investor, from interest and dividends from investee companies to capital gains and/or losses on the principal amount invested.

HOW IS A SOCIALLY-MOTIVATED COMPANY DIFFERENT?Socially-motivated companies, like most mainstream companies, are managed commercially to increase revenue and create surplus income to achieve growth. The principal difference from most mainstream companies is that socially-motivated companies have an additional core objective of creating a lasting social benefit. Some socially-motivated companies dedicate all surpluses towards promoting social objectives, others deliver a return to investors whilst reinvesting part of their profits towards increasing their social impact. It is the companies which deliver a return to investors, in addition to making a social impact, which are the focus of impact investment.

WHY MAKE IMPACT INVESTMENTS? Social problems are often complex and need long term sustainable sources of investment which neither governments nor charitable foundations have the resources and methods to address alone. Socially-motivated companies operate in a large range of sectors in the UK and play an increasingly important role as a driver for social and economic change.

Yet financial institutions lend a limited portion of their balance sheets to this sector. Increasingly, impact investors are stepping in to bridge this funding gap. Impact investment can provide a long term commitment to the success of socially-motivated organisations. With sustainable, long term funding, these businesses will be able to grow and to tackle entrenched social problems more successfully.

WHAT DOES THE UK’S IMPACT INVESTMENT MARKET LOOK LIKE?Impact investment emerged in the UK in the early 2000s and began to spread more widely into investments that are diverse in terms of social mission and impact, risk-reward profile and structure. An expanding number of investors have shown an understanding of the impact investing arena and are engaging with their banks and financial advis ers to find suitable financial mechanisms and instruments in which to invest.

Examples of impact investment opportunities launched in the UK include Allia’s East London Bond, Big Issue Invest’s Social Enterprise Investment Fund, Bridges Venture’s Social Entrepreneurs Fund and Community Development Ventures Funds, FSE’s Community Generation Fund (in partnership with National Energy Foundation), FSE’s Social Impact Co-Investment Fund (in partnership with Resonance), Scope’s bond programme (in partnership with Investing for Good) and Social Finance’s Peterborough Prison Social Impact Bond.

The majority of the investor base for impact-oriented funds is still made up of high net worth individuals, trusts and foundations. Opportunities for mass affluent individuals and clients of private wealth managers to invest in this sector are limited. The total amount of impact investments made in 2010 in the UK is estimated at £190 million. This compares with £55 billion of small business lending and £13 billion of individual giving. Social Impact VCT provides what the Directors believe to be a unique opportunity for individuals to have exposure to a diversified portfolio of unquoted smaller companies in the impact investment market.

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HOW DO IMPACT INVESTORS ACHIEVE A FINANCIAL RETURN? A number of socially-motivated companies have enjoyed good growth in revenue in recent years, based on solid commercial skills and discipline, whilst maintaining their articulated social mission. Broadly speaking, companies with an objective of making a lasting social impact, whilst delivering a financial return for investors, can be categorised as follows:

− Social impact activities are conducted in addition to the core business (although they may be related) and surpluses from the core business are used to fund social impact activities. Under this model, social impact is only possible after profits have been generated. The extent to which financial surpluses are deployed for social causes and the nature of these will determine the overall blended return.

Example: Hackney Community Transport

Hackney Community Transport (HCT) is a social enterprise in the transport industry, providing over 13 million passenger trips on its buses every year. The organisation delivers a range of transport services, including school transport, Park and Ride and community transport, and provides education and training for individuals living in the communities in which HCT operates. HCT is also the only social enterprise that operates London red bus services under contract for Transport for London, delivering 10 bus routes for them. In 2011/2012, HCT generated revenues of £ 28.6 million. 38% of the profits made through the delivery of commercial transport services are reinvested into further transport services (e.g. in the provision of accessible, low-cost minibuses for groups who are unable to access mainstream transport), training and other projects in the communities that HCT serves.

Source of information: Hackney Community Transport 2011/2012 audited accounts

− The company’s core business involves social impact activities, so financial returns are directly driven by success in the delivery of social activities and outcomes. The level of social return will depend on the nature and success of the core business.

Example: Cool2Care Cool2Care is a social enterprise supporting families with disabled young people. It is hired by local authorities around the UK to provide a childcare introductory service that recruits, screens and trains care workers, bringing together families with disabled children or adolescents with individuals who want to work caring for them. Other services provided by Cool2Care include volunteer befriending and workforce development services. The organisation generated revenues of £1.1 million in 2011 . Some of the key social impacts generated include improving stimulation and social skills for disabled children, improving the physical and mental wellbeing of the parents with disabled children and creating opportunities for families with disabled children for improved productivity for the primary earner in the family and the scope to return to work for the secondary earner in the family.

Source of information: Cool2Care 2011 audited accounts

Example: Bromley Healthcare Bromley Healthcare is a social enterprise providing community health services to the 300,000 residents of Bromley in south east London. It was formed by 800 staff ‘spinning-out’ of the NHS to form a new community interest company.

Bromley Healthcare provides a wide range of nursing and therapy services, from school nursing to specialist services to support for frail older people with long term conditions. The organisation i s forecast to generate revenues of close to £ 40 million this financial year. Bromley Healthcare delivers social impact by delivering improved health prevention and community health care for vulnerable residents of Bromley, and reinvesting surplus for the improvement of local health. Since spinning out, Bromley Healthcare has found that its new freedoms have allowed it to improve the quality of its services and its efficiency far more rapidly than it otherwise would have.

Source of information: Bromley Healthcare Integrated Business Plan 2011 – 2016 as supplemented by correspondence from Bromley Healthcare


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− Payment by social results, where financial returns are only delivered if pre-determined, specific social outcomes are achieved (e.g. Peterborough Prison Social Impact Bond, where investors’ returns are driven by reduction of re-offending amongst former prisoners or contractors delivering the Work Programme, where contractors’ revenues are dependent on the employment outcomes achieved).

Example: Peterborough Prison Social Impact BondThere are approximately 40,200 adults in the UK serving short prison sentences (less than 12 months). On release, these offenders receive no probation support and struggle to address the root causes of their offending. 60% have re-offended within 1 year of release. The average male short sentence prisoner has 16 previous convictions and spends his life going in and out of prison. The Social Impact Bond pilot in Peterborough provides comprehensive support to all male short sentence offenders leaving HMP Peterborough. The programme will support 3,000 offenders pre and post release over a 6 year period. If the project is successful in achieving a reduction of 7.5% or more in re-offending across the 3,000 offenders, the Ministry of Justice will pay investors on the basis of the number of reconviction events reduced. If successful, investors can expect an Internal Rate of Return of 7.5% - 13%.

Source of information: Social Finance website

Example: Careers Development GroupCareers Development Group (CDG) is a leading “welfare-to-work” social enterprise with nearly 30 years’ experience in helping those who are unemployed find and sustain employment. CDG supported more than 30,000 people on their journey into work during 2011, from 26 centres, and employs more than 300 staff in total. CDG started delivering the coalition government’s flagship Work Programme as a prime contractor in London East in June 2011. In alliance with international welfare to work provider MAXIMUS, it is also delivering the Work Programme in London West and Berkshire, Buckinghamshire, Oxfordshire, Hampshire and the Isle of Wight. Revenues are received by CDG when outcomes are achieved, with the majority of outcome payments paid out by the Department for Work and Pensions once a client has remained in work for at least 13 weeks. Many of the people CDG supports are inhibited by multiple barriers to employment, including a lack of recent work experience, disabilities, health problems and a lack of relevant employability skills.

Sources of information: Careers Development Group website, Department for Work and Pensions website

MEASUREMENT OF SOCIAL IMPACT Social impact is measured so that investors can see whether their investment is having the impact intended, which will help inform future investment decisions. Organisations need to be able to demonstrate that their services are working in order to attract customers and secure further investment capital. A number of different tools and methodologies exist to help businesses measure their social impact. Depending on the reason for measurement and the degree to which quantification of social impact is reasonable or desirable, socially-motivated businesses may choose different ways of measuring and reporting their social impact. A more detailed description of social impact measurement can be found on pages 22-23 .

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Part One: The OfferINTRODUCTION TO THE OFFERVCTs were introduced by the UK Government in 1995 to encourage individuals to invest in smaller UK companies. The Government achieved this by offering VCT investors a series of tax benefits. The total invested in VCTs between 1995 and 2011 was more than £4.2 billion.

The Directors believe that an investment in Social Impact VCT will provide individuals with exposure to a diversified portfolio of unquoted UK smaller companies which make a distinct positive contribution to improving society. These socially- motivated companies will need to demonstrate an ability to create and sustain measurable social impact on their business area, alongside an ability to generate a financial return over the planned investment period of up to 8 years. The Company is seeking to raise gross proceeds up to £20 million pursuant to the Offer and will invest the proceeds in accordance with its investment policy, further details of which are set out on pages 20 to 21 . The Offer opens on 13 November 2012 and will be open until 5.00 pm on 5 April 2013 in the case of applications for the 2012/2013 tax year. For the 2013/2014 tax year the Offer will open on 6 April 2013 and close at 5.00 pm on 12 November 2013, unless fully subscribed earlier. In the event of the Minimum Gross Proceeds not being reached by 5 April 2013, the applicant can have his/her application for the 2012/2013 tax year rolled over to the 2013/2014 tax year by providing consent in the Application Form. In the event of the Minimum Gross Proceeds not being reached by 12 November 2013, the Offer will lapse and applications monies which have been received will be returned without interest. The Board reserves the right to close the Offer at a date earlier than 12 November 2013.

TAX BENEFITS FOR INVESTORSThe Company is structured as a VCT to allow qualifying investors to take advantage of substantial tax benefits, including 30% income tax relief on the amount invested. The income tax relief means that taxpayers should benefit from a £3,000 reduction in their tax bill for every £10,000 invested, provided that the Ordinary Shares are held for a period of five years. In addition, qualifying investors should benefit from dividends paid by the Company being tax free and no capital gains tax on a disposal of Ordinary Shares.

The following shows the effect of the income tax relief for a qualifying investor who invests £10,000:*

£

If you subscribe 10,000 to the Offer

You can claim income tax relief of

3,000 subject to certain limits and restrictions

So your net cost of investment would be

7,000

Your shares would have an initial Net Asset Value of

9,450 being the net proceeds to the Company from your subscription after deduction of the costs of the Offer of 5.5%**

This initial Net Asset Value is 2,450 more than your net cost of investment

or a gain of 35% on your net cost of investment

Investors can apply for Ordinary Shares in respect of the 2012/2013 tax year and/or the 2013/2014 tax year.

*The actual return for an investor, apart from the tax relief, will depend on the returns from investments made by the Company, less fees and costs incurred over the life of the Company. ** Not taking into account the effects of any Ordinary Shares issued under the early investment incentive or as a consequence of permissible initial intermediary commissions having been waived.


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Th is is only a brief summary of the UK tax position for investors in VCTs and is based on the Company’s understanding of current law and practice. Further details are set out in Part Two of this document. Details of how to claim the income tax relief are set out on page 39 .

INVESTMENT POLICY

Investment objectiveThe objective of the planned-exit Social Impact VCT is to invest in UK companies which make a distinct positive contribution to improving society. These socially- motivated companies will need to demonstrate that they create and sustain measurable social impact on their business area, alongside providing a financial return to VCT investors.

Investment strategyThe investment portfolio is to include businesses that create social impact in 4 key areas:

Building Futures

Community Cohesion

Socially -m otivated Brands

Health and Education

Companies engaging with people who are marginalised, vulnerable or disadvantaged to help build their futures

Companies working in local communities to support cohesion and improve access to service and opportunities

Companies p romoting thoughtful consumer brands that create their products and services in an ethical or socially- motivated way

Companies building human capital by enhancing health and education provision for individuals

Asset allocationBy the date from which all funds raised are required to meet the VCT qualifying rules, the Company will have invested between 70 and 80% of its funds in Qualifying Investments, both in equity and a mixture of secured and unsecured debt in accordance with the VCT qualifying rules. Initially, the funds will be maintained in low-risk instant access or short term interest bearing deposit accounts with UK-registered financial institutions (collectively referred to as “Deposits”). Whilst suitable Qualifying Investments are being identified, the Managers may at their discretion from time to time propose that some funds are invested in money market funds, fixed interest securities or secured loans, including, where feasible, instruments offered or issued by social lenders or socially- motivated companies (collectively referred to as “Non-Qualifying Investments”). All such Non-Qualifying Investments will be considered on the basis of liquidity required to support the VCT costs, fees and Qualifying Investment pipeline and will in all cases be subject to prior approval by the Investment Committee. The Investment Committee shall also review the location and nature of all funds of the VCT on a quarterly basis. Progressively, the Deposits and Non-Qualifying Investment portfolio will be realised in order to fund investments in Qualifying Investments.

The Company’s maximum exposure to Qualifying Investments will be 90% during the life of the VCT. The Company intends to retain its remaining funds in Non-Qualifying Investments to fund the annual running costs of the Company and to reduce the risk profile of the overall portfolio of the Company.

After investing 80% of funds raised in Qualifying Investments, the Company will aim to have at least 10 investments to provide diversification and risk protection. In any case, an investee company’s gross assets will not exceed £ 15 million prior to investment to ensure compliance with VCT legislation. In relation to the Company, no single investment will represent more than 15% of the aggregate value of the Company’s assets at the time the investment is made.

Risk diversification The structure of the Company’s funds and its investment strategy have been designed to reduce risk as much as possible.

The main risk management features include:

− A significant proportion of the portfolio will be invested in social enterprises and socially- motivated companies which are either established and seeking to expand their geographic or product reach,

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or whose revenue streams are expected to be underpinned wholly or partially by confirmed delivery contracts;

− In many cases, it is expected that the investment will comprise a mix of debt and equity instruments consistent with VCT eligibility rules, under which the majority of the return will be achieved primarily via a current yield (interest on the debt instrument and/or dividend income on the equity instrument), with the debt instrument holding a 5-year repayment term, to facilitate the Social Impact VCT’s exit from the investment;

− The Company, once fully invested, will aim to invest in at least 10 different companies, thereby reducing the potential impact of poor performance by any individual investment; and

− No more than 15% at cost of the VCT investments (at the time of investment) being invested in the same company.

BorrowingThe Board will consider borrowing if it is in the Company’s best interest to do so up to a maximum amount equal to 20% of its net asset value.

Change in investment policyA material change in the investment policy of the Company will only be effected with the prior approval of the Company’s shareholders in accordance with the Listing Rules.

INVESTMENT PORTFOLIO AND KEY INVESTMENT AREASIt is expected that a proportion of the portfolio will be invested in social enterprises and socially- motivated companies which are either established and seeking to expand their geographic or product reach, or whose revenue streams are expected to be underpinned wholly or partially by confirmed delivery contracts. There is a range of socially- motivated companies which have achieved good growth in revenue in recent years based on solid commercial skills and disciplines, whilst maintaining their articulated social mission. Examples of the type of companies that could fit in the four key investment areas are illustrated in the section headed “How do Impact Investors Achieve a Financial Return” on pages 17 to 18 of this document. Examples of how companies in the 4 key investment areas can generate blended financial and social returns are described below.

Examples

Building Futures: − A social enterprise operating catering, retail and hospitality businesses to provide training and

employment opportunities to people who are homeless and marginalised. Revenues generated from the operation of these businesses are reinvested to create more training and employment opportunities and also provide a return to investors.

− A social enterprise running a specialist part time recruitment service that supports women back into employment, helping them fit work around the needs of their family. The company also works with employers to design part time jobs that benefit their businesses.

Community Cohesion: − A community transport company providing a range of transport services, including commercial

bus routes. Profits generated from commercial activities generate a return to investors and the remainder is reinvested in providing affordable transport services, training and other projects for local communities.

− A social enterprise operating leisure and fitness facilities, promoting healthy living by increasing levels of physical activity through affordable sport and health programmes that reach all sectors of the community. Revenue is generated from the public paying for the use of these facilities and through service contracts with local authorities. Revenues generated are reinvested in providing better services to the public and providing a return to investors.


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Socially -Motivated Brands: − A socially-motivated company selling branded chocolate products aimed at the mass market in

the UK. The company improves the livelihoods of cocoa producers in developing countries by providing a fair price for their cocoa and by enabling them to own part of the company and earn dividends. As shareholders in the company, cocoa producers are able to provide meaningful input into decisions about how products are produced and sold, and receive a share of the profits from the sale of the products alongside other shareholders.

− A socially-motivated company providing an online fundraising service that makes it easier for donors to donate to charities, thereby enabling charities to raise more money. Charity members pay the company a fee for this service, which is then re-invested into providing better fundraising tools and technologies.

Health and Education: − A social enterprise providing recruitment, screening and training for care workers, matching

them with families with disabled young people. Revenues are generated from contracts with local authorities, which pay for this service. The service improves the wellbeing of the disabled child, alongside improved wellbeing and productivity of the parents.

− A social enterprise spun out of the NHS, which provides high-quality therapy and community nursing services to the local population. It is owned and run by the nurses and therapists it employs. Profits are reinvested back into improving patient care. The enterprise is looking to develop a significant telecare offering and is also interested in providing for children with complex needs and end of life care.

SOCIAL IMPACT MEASUREMENTGiven the diversity of portfolio companies envisaged, it is intended that Social Impact VCT would work with each investee company to establish a set of meaningful and timely outcome metrics that are individual to each investment. These outcome metrics will then be measured on a frequent basis to track the company’s progress in generating social impact through the life of the VCT investment. Due to the wide ranging social objectives of companies across different investment areas (for example, improved employability versus better health outcomes), it will likely be challenging to compare investee companies’ social impact across sectors within the investment portfolio. A more meaningful comparison will be between companies within a certain sector (for example, companies providing services designed to improve employability of young people will use similar outcome metrics, (e.g. the number of training places offered), or a comparison across time for a single company to measure whether the company has managed to augment its social impact over time. In the case where no suitable comparison can be found from within the portfolio, the social impact measurement framework would enable single company comparisons across time by tracking a set of agreed outcome metrics over the life of the VCT. The Managers do not envisage seeking any comparison companies from outside of the Social Impact VCT’s portfolio.

Whilst in the longer term, it is hoped that the social enterprise universe as a whole would move towards a more standardised approach to social value measurement, such that there is a set of common, outcome based social value metrics for each sector, and an accessible databank for storage of information on these common metrics, this standardised approach does not yet exist. Given the practical difficulties of collecting and accessing data of companies outside the portfolio, the Social Impact VCT intends to focus on impact measurement of investees within the portfolio.

Shareholders will be provided with an annual Social Impact Report with information on each investee company. It is intended that this report would provide outcome metrics measured, as well as qualitative case studies to illustrate how the investee is generating social impact.

Illustrative outcome indicators measured for the example companies in the four key investment areas are provided below.

Building Futures – social enterprise providing training and employment opportunities to homeless and marginalised people:

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− Number of training places offered

− Number of accredited qualifications awarded

− Number of work experience hours provided

− Number of participants in the training programme moving into work and the percentage success rates thereof

Community Cohesion – community transport company providing range of services to communities:

− Number of passenger trips provided to community groups

− Number of passenger trips provided to disadvantaged individuals

− Number of individuals who gained qualifications as a result of training/support provided by the company

− Unemployed people who obtained jobs in other organisations as a result of training and support provided by the company

− Number of FTE jobs created at the company

− Number of car journeys saved through the use of community group transport

Socially -Motivated Brands – socially-motivated UK company selling chocolate products, partly owned by cocoa cooperative in developing country:

− Number of farmers working for cocoa cooperative

− Monetary value of the benefit per cocoa producer achieved from trading at Fairtrade minimum prices

− Monetary value of the Fairtrade premium distributed to communities

− Number of hours of training provided to farmers and workers

− Monetary value of the company profits distributed to cocoa cooperative

Health and Education – social enterprise recruiting, training and matching care workers to families with disabled young people:

− Number of care workers (known as Personal Assistants, PAs) placed with families

− Number of PAs recruited

− Number of PAs trained

− Number of hours of PAs training provided

It is also intended that there would be the opportunity for Shareholders to meet the management of investee companies at the annual general meeting of the Company.

INVESTMENT STRUCTURESWhilst a variety of investment structures can be applied, the base case investment structure will be a 5 year investment term, with a mix of either secured or unsecured 5-year debt instrument (approximately 30% of capital invested) and an equity instrument (approximately 70% of capital invested). The 30-70 debt-equity split is the target split for the portfolio of Qualifying Investments. It is expected that the yield of this investment structure in many cases will be channelled through the debt instrument via annual interest payments.

It is the intention of the Company that, at exit (typically at the end of a 5 year investment period), the loan capital will be repaid. The equity capital where appropriate may be repaid via a refinancing exercise, underpinned by the 5-year track record and expected cash generation levels of the investee company. In addition, the Company will on each investment be seeking a commitment from the investee company, its other shareholders (or those standing behind those other shareholders), or from another social impact investor to procure a buyer for the Company’s equity (at no less than the original issue price) at the time the debt is being repaid. It is envisaged that this would be funded either through the existing


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resources of the investee company or its other shareholders, or a re-financing put into place at that point (which could be from another social impact investor).

To encourage the investee to procure an exit for the Company, and also to provide some protection in the event of a failure to do so, the Company envisages that debt would remain in place until a buyer for the equity is found, but with an enhanced return by way of interest and/or redemption premium.

Legislation has been introduced (see Part Three of this document) which may limit the structures through which a VCT may invest. This could impact on some of the structures that the Company has considered for funding joint ventures with companies limited by guarantee or community benefit Industrial and Provident Societies. However, the Directors believe that the changes will not prevent the Company adopting its base case investment structure when the investee company carries out a “bona fide” trade and does not outsource the majority of its operations to third parties or other co-investors.

INVESTMENT PROPOSITION The underlying investment portfolio is anticipated to provide qualifying investors with the following:

− The ability to support the growth of enterprises that make a distinct positive contribution to improving UK society as evidenced through the Social Impact Report and the opportunity to meet with the management of investee companies;

− Capital preservation due to a focus on investment in social enterprises and socially- motivated companies which are either established and seeking to expand their geographic or product reach, or whose revenue streams are expected to be underpinned wholly or partially by confirmed delivery contracts. In many cases, it is expected that the investment will comprise a 5 year instrument with a mix of debt and equity, under which the majority of the return will be linked to the debt instrument to facilitate Social Impact VCT’s exit from the investment;

− Return of capital in Years 6, 7 and 8;

− Dividends planned in respect of the second financial year of the Company onwards (although the payment of dividends may be constrained in the event that Social Impact VCT raises substantially less than £20 million); and

− In the context of a £20 million fund, an Annualised Return of 2 – 3% post costs and before taking account of any tax benefit an investor may receive.

An illustration of the total return on an investment after eight years for a UK tax paying investor (in the context of a £20 million fund) is 118.5 p (tax free) on every 70p invested (100p gross less 30p VCT income tax relief). This return to the Shareholder is likely to be comprised of a combination of tax-free dividends and capital gains, and return of the original capital investment (expected to take place starting from Year 6). Taking into account the 30% income tax relief on the initial investment, the pre-tax equivalent return is up to 7.9 % per year (for a 40% taxpayer) and up to 8.1 % per year (for a 45 % taxpayer).*

THE BOARD The Board consists of four non-executive directors, John Gregory (Chairman), Jeremy Delmar-Morgan, Mark Mansley and Jonathan Roe. All non-executive Directors are independent of the Managers. The Board has substantial experience of venture capital and VCTs, private equity businesses, impact investment and capital markets, and has overall responsibility for Social Impact VCT and its affairs, including its investment policy. The Board has appointed FSE FM and Social Finance as the Managers on a discretionary basis. The Board, however, retains the responsibility for approving both the valuations of the portfolio and the net assets of the Company which are calculated by The City Partnership (UK) Limited.

John Gregory (Non-Executive Chairman)John Gregory is a chartered accountant who for the last 17 years has concentrated on non-executive roles with young, fast growing companies.

* The pre-tax equivalent return is calculated based on a 25% income tax charge to a 40% taxpayer on taxable gross non-VCT dividends or a 30.6 % income charge to a 45 % taxpayer on gross non-VCT dividends. These figures take into account the nominal 10% tax credit. The pre-tax equivalent return calculation is not applied to the principal returned to the investor.

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He is currently non-executive chairman of Foresight VCT plc, which specialises in investing in clean tech, renewable energy and infrastructure businesses and is also a non-executive director of Sphere Medical Holdings plc. Sphere Medical Holding plc is a medical device company, which was admitted to AIM in November 2011. From June 2000, John was a non-executive director and subsequently chairman of IS Pharma plc, a speciality pharmaceuticals company listed on AIM. In May 2011 IS Pharma plc merged with Sinclair Pharma plc and John was non-executive chairman of the enlarged group until he relinquished this position following the successful integration of the companies in September 2011.

John was a founder, director, and subsequently chairman, of Enterprise VCT plc (subsequently Noble VCT plc) until its assets were transferred to Foresight 3 VCT plc and he became a director of this company, prior to taking the chair at Foresight VCT. John’s earlier career included appointments as a director of Singer & Friedlander Holdings and managing director of Henry Ansbacher & Co. He was also previously a director of Bluehone AiM VCT plc, The 1855 Club plc, Epic VCT plc, The Centre for Accessible Environments, Local Allotments plc and Liquid Lens Europe Ltd. He was named ‘AIM non-executive Director of the Year’ in March 2011 in the annual Peel Hunt and Sunday Times sponsored non-executive director awards.

Jeremy Delmar-Morgan (Non-Executive Director)Jeremy Delmar-Morgan joined Allenby Capital as non-executive chairman in January 2010 and has over 40 years of corporate broking experience.

He spent much of his career at Teather & Greenwood where he was a senior partner from 1985 until 1997. When Teather & Greenwood became a public company in 1998, Jeremy was promoted to chief executive before moving onto the role of chairman of the Board in 2000. Jeremy was also chairman of Hichens, Harrison & Co, London’s longest established stockbroker, which was sold to Religare for £65 million. He was previously also a partner in Hoblyn, Dix & Maurice and a director of Vickers Da Costa Limited.

Jeremy currently holds various non-executive directorships and is on the board of AIM quoted Braveheart Ventures plc. He is also on the board of the London Symphony Orchestra Endowment Fund.

Mark Mansley (Non-Executive Director)Mark Mansley has over 25 years of investment experiences, including 18 years of working in socially responsible investment.

He is currently working as investment manager of a public sector pension fund with a strong focus on sustainable and responsible investment. Prior to that, he was an investment director at Rathbone Greenbank Investments where he was responsible for managing social enterprise investments on behalf of clients in a number of innovative social businesses. He served on the board of the Pennine Downing Ethical VCT plc, the UK’s first ethical VCT. Prior to this he was consultant, working with both investors looking at sustainable investment, green and ethical businesses looking to raise capital and policymakers looking to support the sector. He started his career as an analyst working at Capel Cure Myers Capital Management, Chase Investment Bank and Schroders plc. He is a chartered fellow of the Chartered Institute for Securities & Investment and a graduate in Mathematics of Cambridge University.

Jonathan Roe (Non-Executive Director)Jonathan Roe has over 25 years of experience advising public companies on major corporate events, including mergers and acquisitions, flotations and raising new equity for quoted companies.

He spent much of his career at Dresdner Kleinwort, which he left in 2009 by which time he was Co-Head of Global Equity Capital Markets. Jonathan led the international flotations of OJSC Oil Company Rosneft GDRs in 2006 (raising £11 billion) and Orange SA in 2001 (raising £9 billion). He has also led the flotations of a diverse range of medium sized companies, including British Regional Airlines plc and JBA Holdings plc and the de-merger and listing of International Personal Finance plc. Jonathan has advised numerous public companies, including Drax Group plc, BAE Systems plc, National Grid plc, 3i Group plc, Fraport AG, Norwich Union plc, St James’s Place plc, United Utilities Group plc, on fund raisings and market and regulatory issues.

Jonathan is a Chartered Accountant and a Fellow of the Securities and Investment Institute.


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THE MANAGERSSocial Impact VCT will be jointly managed by FSE FM and Social Finance. FSE FM will act as Social Impact VCT’s Investment Manager and will focus on preparing investment recommendations for the investment committee and subsequent investment execution and commercial performance monitoring. Social Finance will act as Investment Adviser and focus on deal origination (including the identification of potential investments which are compatible with Social Impact VCT’s investment policy) and social impact monitoring.

As Social Impact VCT’s Investment Manager, FSE FM, part of the FSE Group, will have the responsibility for investment appraisal and commercial due diligence, deal structuring and pricing (in collaboration with Social Finance), co-ordination of Investment Committee meetings and approvals, deal execution post approval, monitoring of investments’ commercial performance and reporting of financial returns. As Social Impact VCT’s Investment Adviser, Social Finance will be responsible for the origination of deals, collaboration on deal structuring and pricing, appraisal of social returns on new projects and on existing investments, and monitoring and reporting of social impact. FSE FM and Social Finance will work together in managing the exits from the investments.

The FSE GroupFSE delivers a range of early stage funding solutions, including mezzanine debt and equity, to provide growth finance as well as business support for innovative SMEs.

FSE operates a blended-ethos business model: whilst its funds are operated on a fully commercial basis (in line with private sector best practice), the funds are also operated to meet the wider economic or social objectives of their respective stakeholders. FSE, as a not for distribution organisation, reinvests any surpluses from its activities into new initiatives.

FSE currently comprises 16 experienced individuals working out of offices in Camberley and Ipswich. The FSE fund management team was recognised as Best Early Stage Investment Team by British Business Angels Association (BBAA) in 2009 and has a strong track record in actively working with and funding organisations across a range of funding vehicles to successfully deliver growth through relatively small investments, both directly as fund manager and through its associated Business Angel Networks. The support that FSE delivers has significant benefits to its investee companies. For example, the turnover of FSE backed companies increased by an average 34% per annum (Economic Impact Survey 2009), compared with 7.8% for the South-East (Office of National Statistics Annual Business Inquiry 2006/07).

FSE has been supporting early stage businesses since 2002. During the financial year end to January 201 2, FSE had c.£31.8 million funds under management. This includes two mezzanine debt funds and one equity fund which collectively have delivered a cumulative £23.8 million of investment to a total of 204 individual SME businesses which in turn have successfully attracted a further £ 116.9 million of additional investment, either alongside or subsequent to FSE involvement.

FSE delivers low default rates and consequent strong returns for the level of risk associated with its investments. For example, the Accelerator Fund, a £10 million mezzanine debt fund which, when launched in 2004, was the first of its kind to address early stage growth businesses by providing expansion finance at early stages of SME development. Despite the high-risk nature of its activities and debt-based nature of support (no equity shareholdings held), this fund has delivered a 10 % gross return (post provisions, pre overheads) on its realised investments to date (97 loans, with average c.30 month life-spans). This fund also retains a “live” portfolio of a further 76 loans, and based on capital and income realised to date and projected net receipts over the remaining loan terms, is expected to generate an overall 12% gross return on investment over the life of the fund.

Whilst Social Finance will be primarily responsible for deal generation, the planned establishment of the Social Impact Co-Investment Fund, a fund to be managed by FSE FM, may enable early identification and financing of promising companies within the social impact sector, and these companies could prove to be suitable for subsequent investment by Social Impact VCT.

FSE also has access to a network of over 350 business angels. Capital co-invested by business angels alongside FSE’s current funds varies depending on the deal and can range from £25,000 to £150,000 from a single investor, and higher if from a syndicate of investors.

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FSE current assets under management FSE has experience of structuring both mezzanine loan and equity deals, either on stand-alone basis or as an element within larger, more complex funding packages. Examples of funds managed by FSE include:

Accelerator Fund (AF): This is a £10 million mezzanine debt fund targeted at early stage but high growth companies which typically are unable to access traditional bank finance to fulfil their expansion needs and which wish to avoid equity dilution. The AF has provided £14.6 million mezzanine loans to 140 early-stage companies since 2004, generating a gross 10% return on investments to date, net of a loan loss ratio of c.13%. Of the sums advanced, £14.1 million has already been repaid or realised to date, with £2.5 million residual live loan balances due to be repaid over the remaining fund life. These portfolio companies have attracted over £70 million of additional private sector funding either alongside or subsequent to FSE involvement.

East of England Regional Growth Loan Fund (RGLF): This is a £6.5 million mezzanine debt fund targeted at early stage and expanding companies which are seeking to supplement funding available from traditional bank sources and which wish to avoid equity dilution. The RGLF has provided £5.4 million mezzanine loans to 42 companies since 2009, generating over £1.5 million gross returns to date and with £4 million of live loan balances currently generating interest and fee income on a monthly basis. The RGLF (as the AF previously) is a recycling fund reinvesting receipts into new loans during the investment period which extends for a further 4 years. The RGLF portfolio companies to date have attracted over £9.7 million of additional private sector funding either alongside or subsequent to FSE involvement

South East Seed Fund (SESF): This is a £7 million early stage equity fund, with an active portfolio of 13 companies and growing, mainly focused on digital media, advanced manufacturing, clean technology and spin-out companies from South East universities. The Seed Fund has invested £ 3.7 million since 2009, with these portfolio companies attracting £35.4 million additional private sector funding either alongside or subsequent to FSE involvement.

Social Impact Co-Investment Fund (SICF): This is a pilot loan fund financed by NESTA and Panahpur, established with the aim of enhancing the supply of early-stage funding to the social impact sector and in particular, to encourage business angel investors to invest in viable enterprises with a primarily social purpose. The fund’s ambition is to convert into a £5-10 million fund size.

Community Generation Fund (CGF): This is a loan fund financed by Big Society Capital and Esmée Fairbairn Foundation, established with the aim of enabling social enterprises within disadvantaged locations to develop, operate and retain ownership of community-scale renewable energy infrastructure, such that surplus revenues can be reinvested into the specific local needs of their respective communities. The fund’s ambition is to grow to a £10-15 million fund size.

FSE example mezzanine investmentsThe Accelerator Fund has made mezzanine loans to 140 companies since 2004. Examples of its investments include:

Company Description

Plum Baby Limited − An organic baby food and organic toddler food business.

− Business commenced trading in 2006.

− FSE provided a mezzanine loan in May 2007 for development of 2 new product lines. Subsequent funds were raised from VC investors (Beringea, Foresight and Octopus).

− FSE loan was repaid on schedule in April 2010.

− Business was sold for £10 million to Darwin PE in June 2010.

− Annual turnover at entry: £1.1 million. Annual turnover at exit: >£10.0 million.


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Company Description

Quotient Diagnostics Limited

− Patented assay technology for facilitating the treatment of Diabetes .

− Company established in 2002.

− FSE provided a mezzanine loan in March 2009 plus a follow-on loan in February 2010 to support pre-revenue product development.

− Substantial VC and angel equity funding subsequently raised.

− Business was sold to EKF Diagnostics PLC (AIM-listed) via a share issue in October 2010.

− FSE loan was repaid ahead of schedule, upon business sale.

− Sales exceeded £1 million in 2011.

British Eco Limited − Design and installation of renewable energy systems for buildings.


− FSE provided a mezzanine loan in March 2010 to support additional sales and marketing budgets for a rapidly expanding franchising strategy.

− Further mezzanine loans were provided in March 2011 (including a mezzanine loan via FSE managed Sustainability Loan Fund) to support continued expansion.

− The business is experiencing rapid growth.

− All FSE commitments are being serviced.

− Annual turnover at entry: £1.8 million. Current annual turnover: £7 .0 million.

Bowman Power Group Limited

− Technology for recovery of useful energy from waste heat.

− Company established in 2004 with business angel and institutional equity funding, to develop innovative “clean power” technology i.e. Turbo Generators to recover waste and exhaust heat.

− FSE provided a mezzanine loan in November 2009 to support ongoing product development.

− Further mezzanine loans were provided in December 2010 (including mezzanine loan via FSE managed Sustainability Loan Fund) to continue the product development strategy.

− Additional £8 million institutional investment has been injected following FSE support.

− FSE loans are being serviced fully on schedule.

− Annual turnover at entry: £1.1 million.

− Current annual turnover: £9.1 million (forecast).

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Company Description

Solution Builders Limited

− Unified communications systems and services to enterprise and SMEs.

− Company commenced trading in 2006.

− FSE provided a mezzanine loan in June 2007 plus a follow-on loan in December 2008 to support expansion of engineering and marketing staff resource.

− Business grew from £0.1 million annual turnover base to >£2.0 million within 2 years.

− FSE loans were repaid on schedule. Founding directors retained 100% equity ownership.

− Annual turnover at entry: <£0.2 million. Annual turnover at exit: >£2.0 million.

Develop IQ Limited − Mobile application development, cloud services and data solutions.

− Company commenced trading in 2005.

− FSE provided a mezzanine loan in September 2007 to support expansion of technical support, developer and sales and marketing staff resource.

− Business grew from £0.3 million annual turnover base to >£2.0 million within 2 years.

− FSE loans were repaid on schedule. Founding directors retained 100% equity ownership.

− Annual turnover at entry: <£0.4 million. Annual turnover at exit: >£1.1 million.

TDB Holdings Limited

− Unified Service ManagementTM for network and data centre management systems .

− Company established in 2002 as a specialist IT management systems integrator but commenced a complementary software development strategy in 2007.

− FSE provided a mezzanine loan in March 2009 plus a follow-on loan in November 2011 to support R&D development on the core Federos™ software products.

− FSE also invested equity into the business in February 2010 via its South East Seed Fund, as part of a wider fund-raising.

− The business is increasing annual turnover and servicing all FSE commitments.

− Annual turnover at entry: £2.0 million. Current annual turnover: >£3.0 million .


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Company Description

Imaginatik Limited − Enterprise-wide innovation and idea management solutions.


− FSE provided a mezzanine loan in March 2006 to support European expansion strategy.

− Within 9 months, company was floated on AIM (market cap. £1.3 million).

− FSE loan was repaid ahead of schedule, upon AIM listing.

− Annual turnover at entry: £1.6 million. Annual turnover at exit: £3.5 million.

Verderg Connectors Limited

− Offshore field architecture, diverless connectors and subsea structures.

− Well established company, trading since 1979.

− FSE provided a mezzanine loan in March 2006 to support operational software upgrades and an overseas liquid natural gas project during a lull in revenue levels.

− FSE support was provided for a specific requirement and time period. Within 12 months, the company refinanced via increased bank funding.

− FSE loan was repaid ahead of schedule, via the additional bank facilities.

− Annual turnover at entry: £3.3 million. Annual turnover at exit: £7.5 million. Turnover in FY11-12 exceeds £15.1 million.

FSE example equity investments The South East Seed Fund is currently making investments. In line with expectations, no exits have yet been realised. Examples of investments include:

Company Description

Datasift Ltd − Technology facilitating live data feed organisation from social media and the web to a digestible format for commercial and individual applications.

− The company has been supported since February 2009 by the South East Seed Fund and angels from the FSE investor network.

− Datasift subsequently completed a $6 million round of VC funding co-led by IA Ventures and GRP Partners. As part of the round the South East Seed Fund increased its stake in the business.

− A further $7.2 million was raised in May 2012.

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Company Description

Parcelpoke Ltd t/a Parcelgenie Limited

− Technology platform for social network sites and mobile that links virtual addresses with billing details and physical delivery addresses.

− The South East Seed Fund first invested in May 2009 and has continued to support the company with further investment from both the fund and FSE investor network.

− Company has recently won a number of industry awards including being selected the “Most Promising Technology Company in the UK 2012” by First Tuesday, and being voted Best Design and Technology company in VentureCandy 2011. The Company has also won Vodafone’s Mobile Clicks and the PepsiCo 10 and is a member of BizSpark One, Microsoft’s elite group of start-ups representing the top 80 from 45,000 companies globally.

Duvas Technologies Limited

− Real time sensing and measurement of multiple simultaneous gases.

− FSE invested in August 2010 .

− Duvas h as established a distribution partnership with Air Monitors and a development partnership with a major defence prime contractor.

Ultrasoc Technologies Limited

− Advanced debugging technology for multiple processor systems.

− Initial academic research at Kent University supported by FSE’s Proof of Concept fund led to Ultrasoc being established in 2005.

− Company was further supported by additional funds from FSE’s Proof of Concept Funds and the South East Seed Fund invested equity in January 2009.

− The company has since attracted £2 million of investment from Octopus Ventures.

Toximet Limited − Disruptive IP protected technology for measuring toxins in food chain. The system has been demonstrated to food processing companies (specifically those involved in edible nuts and rice).

− The South East Seed Fund first invested in March 2009 to follow an investment made by FSE’s Proof of Concept Fund in November 2006. Toximet Limited is a ‘spin-out’ from University of Greenwich.

− First product has been launched and is selling well globally, with instruments already installed in Vietnam, China, Italy, Eastern Europe and Middle East.

Social FinanceSocial Finance was set up in 2007 to help build a social investment market in the UK and is regulated by the FSA. Social Finance is a not for profit organisation. It identifies ways of improving the access to capital for those looking to drive social change and develops investment propositions offering both social and financial returns. Social Finance’s team draws together a combination of former investment bankers, strategy consultants, government officials and social sector experts. Social Finance brings private equity investment expertise and corporate finance structuring experience to Social Impact VCT, alongside its ability to use its network and market knowledge to generate a pipeline of potential impact investment opportunities.

Social Finance is the leader in the design and delivery of Social Impact Bonds. Social Impact Bonds are an innovative form of outcomes based contract in which public commissioners commit to pay for


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significant improvement in social outcomes (such as a reduction in offending rates or a reduction in the number emergency admissions into hospital) for a defined population.

In September 2010, Social Finance launched a Social Impact Bond that funds interventions to reduce reoffending among short sentence offenders from HMP Peterborough. The Peterborough Social Impact Bond was oversubscribed. Social Finance successfully raised £5 million for the bond, which is expected to generate an annual return of 7.5% - 13% to investors if social outcomes are successfully achieved. Other examples of Social Finance’s capital raising and financial advisory services include £640,000 loan capital raised for East Lancs Moneyline, which provides loans to financially excluded individuals across the UK, and a 7-month study for the HM Treasury to develop commercially viable budgeting bank accounts for low income consumers.

Social Finance has developed a wide network of contacts in the social investment sector through its activities in advisory, product development, capital raising and Social Impact Bond delivery. For example, through the development of Social Impact Bonds in diverse social areas such as criminal justice, chaotic families, vulnerable children and young people, health and drug rehabilitation, the organisation has engaged with many socially-motivated companies working in these areas. In the past 12 months, Social Finance has been in contact with over 150 socially- motivated companies in relation to its development of Social Impact Bonds alone. The media profile of Social Finance should assist in ensuring a good deal flow to Social Impact VCT. Combined with FSE’s access to a large business angel network and to potential investment propositions through the other funds it manages, it is envisaged that the VCT will be in an advantageous position in sourcing opportunities in the impact investment space.

The investment teamThe investment team of Social Impact VCT is comprised of a number of individuals within FSE and Social Finance. Over the last ten years members of this team have established an excellent track record of making investments in early stage unquoted companies and have deep and broad experience of creating appropriate structures for such investments.

The FSE team Kevan Jones (Chief Executive Officer) leads the FSE Group. Kevan has over 30 years of experience in funding small and medium sized companies in traditional banking, acquisition finance, asset finance and invoice finance. Kevan joined FSE originally in 2004, working within, managing and developing new funds, before becoming Head of Funds Management and main board director, overseeing all fund management operations, including investment in 150 small companies. Kevan was more recently group sales and marketing director of Ultimate Finance Group, an AIM listed provider of SME finance solutions, and rejoined FSE in mid-2012 as CEO. Previously, he was a board member at Lombard NatWest Commercial Services and held senior positions at NatWest Markets. He holds a MBA (Distinction) from Warwick Business School.

Martin Rigby (Chairman of FSE FM, the wholly-owned and FSA authorised subsidiary of FSE) . Martin joined the Cambridge office of 3i in 1986 as a specialist investor in start-up and early stage technology businesses. In 1992 he founded ETCapital Limited. He has made investments in over forty technology businesses over the past 20 years. Martin is currently CEO of the online music community, Psonar. He read history for his first degree at New College, Oxford, and was a regular army officer for seven years before completing a MBA at Cranfield University.

Julie Silvester (Head of Equity Funds at FSE), has spent 10 years in leveraged and corporate finance (private equity deals) with Natwest Markets and Hawkpoint Partners before moving to the position of Head of Equity Funds at FSE. She is responsible for management and delivery of FSE FM’s equity funds and new fund development. Julie is FSA authorised with a Securities and Investment Institute Diploma and a BSc in Money, Banking and Finance.

Jeff Dober (Head of Debt Funds at FSE), has over 20 years of lending experience within structured and cash flow transactions. He was previously head of acquisition finance within the London based office of a Middle East institution and director within the acquisition department of Commerzbank, a major European bank. This experience includes both senior and mezzanine funding in MBO/MBI transactions in both large international syndication markets and regional mid-lower end markets.

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James Edwards (Fund Manager at FSE), has over 20 years of experience in funding and supporting the growth of UK and international businesses and of regional economic development. After a number of banking roles encompassing small business lending and acquisition fi nance he joined the South East Enterprise Development Agency to manage the Inward Investment Team. In 2003 he helped establish and subsequently facilitated the development of Finance South East (now The FSE Group, “FSE”). James is currently responsible for new business activity and portfolio management for the South East Sustainability Loan Fund for businesses operating in new and emerging ecologically driven market sectors. He also manages a number of FSE’s legacy funds. James has a BSc in Economics and is FSA authorised.

Ian Baker (Senior Fund Manager, Accelerator Fund, at FSE), has extensive experience of successfully assessing and structuring mezzanine debt investments at FSE. He was previously a Senior Corporate Banking Manager at HSBC and prior to joining FSE, a Senior Consultant at the national accountancy firm, Tenon (now known as RSM Tenon).

Stuart Ager (Senior Fund Manager, Regional Growth Loan Fund, at FSE), joined FSE after a successful career with NatWest / Royal Bank of Scotland Group and UK Trade and Investment. At NatWest, Stuart concentrated on SME lending, joining the Technology Sector Group (TSG) in 1996 and becoming head of TSG in 2000. Stuart was seconded to the UK Trade & Investment Global Entrepreneur Programme for a period of 2 years from July 2006 and moved from the bank to lead this programme in 2008.

The Social Finance teamThe Social Finance team brings substantial experience in private equity, corporate finance and impact investing.

David Hutchison (CEO), joined the organisation in 2009 after a 25 year career at Dresdner Kleinwort where he was most recently head of UK Investment Banking . He has considerable experience of raising both debt and equity capital. David has been heavily involved in structuring, negotiating and distributing each of the social investments developed by Social Finance over the past three years.

Annika Tverin (Director), joined the organisation in 2008. Annika has co-responsibility for developing Social Finance’s impact investor universe as well as crafting diversified investment schemes and leading selected capital raising campaigns. In 2010, Annika helped raise a 3.50% coupon £640,000 loan capital bond for East Lan cs Moneyline, a provider of unsecured personal loans in England and Wales. Prior to joining Social Finance, Annika worked as Director in the equity capital markets groups of Credit Suisse, Assistant Director at ABN AMRO Rothschild and Vice President at Morgan Stanley. She started her investment banking career in M&A at Morgan Stanley, having prior to that worked for the strategy consulting firm LEK Consulting . Annika has a BA in Economics from Knox College , a MA in International Politics from Tufts University, and a MBA (Honours) from INSEAD .

Robin Black (Advisor), has a 27 year career of private equity investing and leveraged finance. Robin’s most recent experience is from two London-based private equity firms where he focused on building and managing entrepreneurial businesses in the UK. He was a founding partner of Balmuir Partners where he was active for 6 years (2005-2010) and a senior partner of Botts & Company for 14 years (1992-2005). Robin is chairman of Osprey Publishing, a director and founder shareholder of Heartstone Inns and is on the investment committee of Finance East Limited (a subsidiary of FSE). He is also treasurer and a trustee of Malvern College, a UK based educational charity. He was previously a non-executive director of a number of private and quoted companies including Malmaison, Cineworld, Continuum Publishing and Primesight Plc, investments which he led whilst at Botts & Company. He is currently a non-executive director of Marechale, the Promoter to the Offer.

Diane Mak (Associate), joined the organisation in 2010. Diane focuses on the development of impact investment products, including diversified investment schemes and Social Impact Bonds. In particular, Diane has worked with a number of local authorities to develop Social Impact Bonds in the area of vulnerable young people and families. Diane previously worked in the investment banking division at Citigroup Global Markets, where she worked on a number of M&A and capital raising transactions in the consumer and retail sector. Diane holds a Master in Public Administration in International


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Development from the Harvard Kennedy School, and has a BA in Economics from Trinity College, Cambridge.

INVESTMENT COMMITTEE The Investment Committee consists of 5 members, 2 FSE representatives, 2 Social Finance representatives and 1 independent member. The members of the Investment Committee are appointed by the Board. The Board also has the right to appoint a member of the Board as a non-voting observer to the Investment Committee.

The Investment Committee will meet to discuss potential investments following due diligence carried out by the Managers on the investee companies. The Investment Committee may, at its sole discretion, refer certain potential investments to the Board in order to discuss such investments with the Board and to receive the Board’s opinion. The quorum of the meetings of the Investment Committee shall be a majority of the members and all decisions of the Investment Committee shall require the approval of a simple majority, comprising at least one representative from Social Finance and one representative from FSE.

Investment Committee members Malcolm Gloak (Chairman, independent), is an experienced director from a venture capital background with a successful track record as both chairman and non-executive director on the boards of quoted and institutionally backed private companies. In 2005, Malcolm joined Catalyst Fund Management and Research (“Cat Fund”), a private equity company with a social mission, to assist in the management of a number of the CatFund’s financial services investments, acting as the representative on the Boards of those companies, ultimately with the objective of the fund successfully realising its investments. Previously, Malcolm worked at 3i for over 25 years, becoming a Manager Director and a member of the UK Management Committee of the company. Malcolm was formerly Chairman of Diagonal plc, the systems integrator, which was successfully sold to Morse plc in 2004. Malcolm also acted as non-executive director or adviser to a number of other private and public companies including: Solid State Logic Ltd, 3TS Venture Partners, MORI Ltd, Mi Services Ltd (MISL), Eurotel Telecom Holdings Ltd, Mermaidlogic Ltd and TDL Infomedia Group Ltd. Malcolm is a graduate of Oxford University and the London Business School.

Mark Burch (FSE representative), is Managing Partner of ARCIS, based in London. He joined ARCIS in 2002 and manages the Group’s UK operations and activities. Mark was at ING Barings for thirteen years in corporate finance in the UK and US, becoming co-head of corporate finance for Europe in 1998. Mark was for 9 years from 2001 a director of the Hackney Empire Theatre and since 2010 has been a trustee of the Arts Educational Schools in Chiswick. Between 2004 and 2010 he was honorary treasurer of a local housing association. He holds a degree from Oxford University and a MBA from Columbia University in New York.

Martin Rigby (FSE representative), see summary on page 32 (“The FSE Team”).

Jonathan Jenkins (Social Finance representative), is CEO of The Social Investment Business, one of the largest lenders in the UK social investment market, with £150 million currently under management. Jonathan has over 15 years of experience in fund raising for SMEs through his City career, which included time at Schroders and culminated in his role as Managing Director of Plus Markets, an FSA regulated stock exchange created by his family to enable access to capital for smaller companies. In his time at Plus, over 500 companies raised more than £1 billion over the exchange. Jonathan joined UnLtd in September 2008 as Director of Ventures, leading their venture grant programme, culminating in the launch of UnLtd’s seed investment initiative “Big Venture Challenge” in May 2011. He was subsequently seconded to NESTA to work on NESTA’s Big Society Finance Fund and to support NESTA in its work for the interim Big Society Capital Investment Committee. Jonathan is a non-executive director of Ethex, the online market and meeting place for ethical investors, and a trustee of Impact Assets (UK) and Bright Charity. Jonathan has a BA in Banking and International Finance from Cass.

Louise Wilson (Social Finance representative), is a director and co-founder of Abundance NRG Ltd, the first community investment platform that lets the general public earn a regular cash

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return by investing in renewable projects in the UK. The aim is to provide a productive investment open to as many as possible (£5 is the minimum investment) and increase the number of stakeholders in renewable energy . Prior to Abundance, Louise spent 16 years at UBS Investment Bank, latterly as Head of European Equity Capital Markets before her departure in July 2008. During that time, Louise worked on a number of Europe’s biggest privatisations, IPOs and follow-on offerings across all sectors. Her motivation to leave came from a desire to do her bit to address the paradox of a world with finite resources and a way of life driven by consumption. Before Abundance, Louise helped start another online business, the shopping and styling recommendation service, dressipi.com, which provides advice to all women on what to wear for free. As a commercial and social entrepreneur, she is aware of the challenges facing any new enterprise and what it takes to succeed. She is a Bachelor of Laws with Honours from Edinburgh University and is part of the charity Ashoka’s Support Network.

INVESTMENT PROCESSFSE has an established approach to investment opportunity assessment and due diligence activities, all of which are undertaken in-house by an experienced fund management team, supported by appropriate legal advice and, where appropriate, involving potential co-investors. FSE FM and Social Finance will work together to follow a multi-stage process which will be applied prior to making Qualifying Investments in unquoted companies, as set out below.

Initial screeningSocial Finance will initiate dialogues with socially-motivated companies with a large enough capital need and business model capable of supporting repayable capital. Identified opportunities will be subject to an initial screening process undertaken jointly by FSE FM and Social Finance, which will be used to assess the potential fit of an opportunity for the VCT from both a commercial and social impact perspective. If this initial hurdle is passed, FSE FM will request the full business plan and supporting information and an in-depth review will be undertaken. If the initial review of the business plan is positive, several meetings may be held with the management team of the investee company in order to assess the team’s ability to achieve the objectives set out in the business plan. In parallel to the business plan review, the social impact of the investee company will be analysed and assessed by Social Finance. The proposition will then be discussed and reviewed and a decision will be taken as to whether to proceed to the next stage of detailed due diligence and deal structuring, with a view to recommending an investment.

Due diligencePrior to making an investment, detailed due diligence will be carried out on the potential investee company, to assess the credibility of the proposition and test the claims set out in the business plan. The due diligence process may include one or more reviews of the investee company’s technology, discussions with customers and suppliers, competitive analysis, sector analysis, contract/framework reviews, assessment of the capabilities of the management team and financial analysis.

The commercial due diligence process will be primarily undertaken in-house by the FSE FM team, leveraging its in depth experience of successfully delivering early stage funding to a range of industry sectors. The social impact due diligence will be undertaken by Social Finance. FSE FM and Social Finance will collaborate closely throughout this process.

Approval and drawdownIf, once due diligence is completed, the Managers remain supportive of the opportunity, a case recommending investment (including deal structure and pricing) will be presented by the Investment Manager for consideration to the Investment Committee. The Investment Committee will make the final decision, which may include additional or amended approval conditions or Board consultation.

Once an opportunity has been approved by the Investment Committee, the Investment Manager will proceed with execution of the transaction, in line with the conditions of the approval. Documentation will be developed, utilising as a starting point existing templates developed for FSE for equity and loan stock as appropriate. Where required, the Investment Manager will also draw on professional input from lawyers, accountants and other specialists to complete the process and make an investment.


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Post-investment monitoringOnce an investment has been agreed and implemented, the Managers remain responsible for ongoing monitoring of the commercial performance and social impact of the investee company. Further details of how social impact will be measured are set out on pages 22 to 23 . Maintaining a strong relationship with clear communications between the Managers and the investee company management is an important element in achieving a successful outcome for the investment, enabling the Managers to remain abreast of current trends and major issues and hence able to step in when action is required as well as to pro-actively support the business in the identification and realisation of opportunities as they emerge.

Social Impact VCT will usually appoint at least one representative to the board of each investee company either as a member or observer, either from within the FSE and Social Finance teams or from a pool of known experts. Day-to-day management will be left to the management team, but Social Impact VCT, via the activities of the Managers, will expect to be involved in strategic decisions, major product or market developments, significant capital expenditure or management changes.

The majority of investments and specifically the base case investment structure will be a 5 year instrument with a mix of either secured or unsecured debt (approximately 30% of capital invested) and equity (approximately 70% of capital invested). It is expected that the majority of the yield of this investment will be channelled through the debt via annual interest payments.

It is the intention of the Company that, at exit, the loan capital will be repaid. Where possible and appropriate, equity capital will be repaid via a refinancing exercise, underpinned by the 5-year track record and ongoing cash generation levels of the investee company. In addition, the Company will on each investment be seeking a commitment from the investee company, its other shareholders, or from another social impact investor to procure a buyer for the Company’s equity at the time the debt is being repaid. It is envisaged that this would be funded either through the existing resource of the investee company or its other shareholders, or a re-financing put into place at that point.

Regular portfolio management meetings will be held by the Managers to review investee company performance within the overall context of the Company to identify issues and actions arising from events within investee companies and to maintain a clear overview of portfolio progress and performance.

COSTS

Management feesThe Managers (i.e. the Investment Manager and the Investment Adviser) will each receive a fixed annual management fee of 1.0% of net asset value, subject to a minimum fee of £100,000 each per annum during years 1 – 3 (which is the envisaged active investment phase) and thereafter subject to a minimum fee of £75,000 each per annum.

In the interest of building the impact investment market and enabling launch of the VCT at a minimum gross proceeds figure of £7.5 million, the Management Fees will be made available to subsidise annual running costs, if required (see below). Also consistent with the above objectives and with the capital preservation focus of the investment policy, there are no surplus performance incentive fees payable to the Managers.

All expenses of the Offer, including commissions payable to financial intermediaries, will be paid by the Company out of the gross proceeds of the Offer, provided that if the total net proceeds would be less than 94.5% of the gross proceeds, the amount of fees payable to the Managers in the first year under this Agreement shall be reduced by an amount equal to £1 for each £1 by which total net proceeds are less than 94.5% of the gross proceeds of the Offer.

The Managers retain the right to charge arrangement, exit and syndication fees to the unquoted companies in which the Company invests. Such charges will be in line with market practice. The Managers may also receive ongoing directors’ fees and monitoring fees from the investee companies as appropriate in line with market practice.

Annual running costsNormal annual running costs of the Company, being Directors’ fees, professional fees and the costs incurred by the Company in the ordinary course of business (excluding Management Fees as described

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above), are capped at the lower of £ 225,000 per annum or 2.5% of net proceeds (if gross proceeds are at or below £1 5 million) or capped at 1.5% of net proceeds (if gross proceeds are in excess of £1 5 million).

Annual running costs in excess of the above sums will be met by way of a reduction in future Management Fees. Such reduction shall apply first in reduction of Investment Adviser fees and thereafter in reduction of Investment Manager fees.

The City Partnership (UK) Limited will provide company secretarial, fund administration services, receiving agent and registrar services to the Company. Further details of the agreements with The City Partnership (UK) Limited are set out at Part Four, paragraph 5.1 of this document.

SHAREHOLDER BENEFITS

Dividend policyVCTs are able to distribute income earned and capital profits from the sale of underlying investments. These distributions are not subject to any further tax to qualifying investors. In order to qualify as a VCT, the Company may not retain more than 15% of the income it receives from shares and securities.

The ability to pay dividends and the amount of such dividends depends, amongst other things, on the amount raised by the Offer, and the level of income and capital returns generated by the investments. In the long term, the return of capital to shareholders will be a result of repayment of capital invested.

The Board plans to pay dividends commencing in respect of the second financial year of the Company although the payment of dividends may be constrained in the event that Social Impact VCT raises substantially less than £20 million. The planned level of dividends is not guaranteed. The following table shows how the tax benefits available on VCT shares, subject to investors’ personal circumstances, can increase the effective yield after tax and on a gross equivalent basis.

Illustrative Yields

Offer Price Illustrative dividends1

Tax-free yield2

Gross equivalent yield3

40% taxpayer 45% taxpayer

Before 30% income tax relief

100p 1.0 p 1.0 % p.a. 1 .3% p.a. 1.4 % p.a.

After 30% income tax relief

70p 1.0 p 1.4 % p.a. 1.9 % p.a. 2.1 % p.a.

1. The Board plans to pay dividends commencing by Year 2 although payment of dividends may be constrained in the event that Social Impact VCT raises substantially less than £20 million. In the context of a £20 million fund, an illustration of the total return on an investment in the Company after 8 years for a UK tax paying investor is 118.5 p (tax free) on every 70p invested (100p gross less 30p VCT income tax relief). The dividend figures included in this table are for illustrative purposes only and the planned level of dividends is not guaranteed.

2. Tax-free yield is calculated by dividing the dividend by the Offer Price, as adjusted under 4 below.3. The gross equivalent yield is calculated by dividing the tax-free yield by 75% (based on a 25% income tax charge to a 40% taxpayer on taxable gross

non-VCT dividends taking into account the notional 10% tax credit) or by 69.4 % (based on a 30.6 % income tax charge to a 45 % taxpayer on taxable gross non-VCT dividends taking into account the notional 10% tax credit).

4. The yields listed for “After 30% income tax relief” are based on an Offer Price of 100p multiplied by 70%, to reflect initial income tax relief of 30%. Investors will be required to pay the full Offer Price and claim the income tax relief separately.

5. The potential effects of the early investment incentive and the waiving of permissible initial intermediary commissions are ignored for the purposes of this illustration.

Buyback policy In order to underpin the ability of Shareholders to dispose of their shareholdings, it is intended that Social Impact VCT will operate a buyback policy, subject to having the requisite Shareholder authorisations in place, complying with relevant regulatory and statutory requirements and having distributable reserves and sufficient financial resources.

Investor communications The Directors recognise the importance of maintaining regular communications with Shareholders. In addition to the announcement and publication of the annual report and accounts and the half-yearly results, Social Impact VCT will also publish quarterly interim management statements through a Regulatory Information Service.


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Alongside the above financial reports, investors will also receive an annual Social Impact Report. There would also be the opportunity for investors to meet the management of investee companies at the annual general meeting of the Company.

In each year (expected)

Year end 31 MarchPosting of annual report July Interim period end 30 September Posting of half-yearly report November

TERMS OF THE OFFERIt is proposed to allot pursuant to the Offer up to 20 million Ordinary Shares to the public. The Ordinary Shares are being offered at 100p per Ordinary Share payable in full, by cheque or banker’s draft, on application. Application will be made to the UK Listing Authority for the Ordinary Shares to be admitted to the Official List. Application will also be made to the London Stock Exchange for Admission of the Ordinary Shares to trading on the London Stock Exchange’s market for listed securities.

The Offer in respect of the 2012/2013 tax year opens on 13 November 2012. The Offer will be open until 5.00 p m on 5 April 2013 (in the case of applications for the 2012/2013 tax year). The Offer in respect of the 2013/14 tax year opens on 6 April 2013 and closes at 5.00 p m on 12 November 2013 (in the case of applications for the 2013/2014 tax year) unless fully subscribed earlier .

In the event of the Minimum Gross Proceeds not being reached by 5 April 2013, the applicant can have his/her application for the 2012/2013 tax year rolled over to the 2013/2014 tax year by providing consent in the Application Form. In the event of the Minimum Gross Proceeds not being reached by 12 November 2013, the Offer will lapse and applications monies which have been received will be returned without interest. The Board reserves the right to close the Offer at a date earlier than 12 November 2013.

Applicants will receive share and tax certificates in respect of the Ordinary Shares allotted to them. Applicants should note that dealings may begin in Ordinary Shares allotted to them prior to receipt by them of the share and tax certificates.

The Company reserves the right (subject to agreement with the Managers) to lower the Minimum Gross Proceeds to no less than £6 million. Such a decision would be made public through publication of a supplementary prospectus.

In the event that the Offer is oversubscribed, allotment will generally be made to investors on a first come, first served basis (but subject always to the discretion of the Directors). Any excess amounts of more than £20 million paid by applicants will be refunded by cheque to the person named in Section 1 of the Application Form. The Offer is not underwritten.

The Ordinary Shares will be issued on a fully paid up basis in registered form. Ordinary Shares will be allotted and issued in respect of valid applications under the Offer when the Minimum Gross Proceeds level has been reached and thereafter on a monthly basis. Details of any such allotments will be announced through a Regulatory Information Service provider by no later than the end of the Business Day following the allotment and dealings in such Ordinary Shares are expected to commence within 3 Business Days of allotment.

If the Company is required to publish a supplementary prospectus, subscribers who have yet to be entered on to the Company’s register of members will be given two days to withdraw from their subscription. In the event that notification of withdrawal is given by post, such notification will be effected at the time the subscriber posts such notification rather than at the time of receipt by the Company. The terms and conditions of Application are set out in Part Five of this document along with the Application Form and details of the application procedure.

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Minimum and maximum investmentThe minimum subscription level under the Offer will be £2,000 and thereafter in multiples of £1,000. The maximum investment in VCTs on which income tax relief can be claimed is £200,000 in each of the 2012/2013 and 2013/2014 tax years.

Applicants may make multiple applications under the Offer provided that the investor guidelines for VCTs are followed.

Additional Ordinary Shares for early investment Applicants whose Application Form is received by 5.30 pm on 21 December 2012, whether applying through an intermediary or directly, will be entitled to 10 additional Ordinary Shares for every £1,000 subscribed.

Claiming the income tax reliefThe process for obtaining the income tax relief is both quick and easy. First, the Company will send you a share certificate and a tax certificate a few weeks after Ordinary Shares are allotted to you. You then have two options on how to reclaim the tax relief:

− You can write to your HM Revenue & Customs office and ask them to change your tax coding under the PAYE system (this is the system that calculates how much tax you pay each month) – you will then receive your income tax relief on a monthly basis through your pay cheques; or

− You can wait until you fill in your tax return at the end of the tax-year.

A more detailed explanation of the taxation considerations for investors is given in Part Two of this document.

Use of proceeds It is intended that the proceeds of the Offer will be used by the Company in accordance with its investment policy, further details of which are set out on pages 20 to 21 .

Promoter and Offer costsThe costs in relation to the Offer will be capped at an amount equal to 5.5% of the gross proceeds of the Offer. This cap will include any initial permissible intermediary commissions and the promoter costs outlined below.

Marechale Capital Plc, an investment banking and corporate finance business that raises capital for both unquoted and quoted high growth companies and funds will act as promoter to the Offer in return for a fee of 1.5% of the gross funds raised (in respect of gross funds raised up to £7 million) and 2.0% of the gross funds raised (in respect of the portion of gross funds raised in excess of £7 million) in each case excluding any gross funds committed by an institutional investor or funds committed by designated investors introduced to Social Impact VCT via the Managers.

Intermediary commissionAuthorised financial intermediaries will, where permissible, usually be entitled to receive an initial commission of 3% on the amount invested by their client. From 31 December 2012 changes introduced by the Retail Distribution Review (RDR) will determine whether commission may be paid by the VCT to a financial intermediary who has given advice. Any application in respect of a personal recommendation provided to an investor by a financial intermediary after 30 December 2012 will have the RDR rules applied concerning initial commission.

Financial intermediaries may agree to waive their permissible initial commission in respect of an application. If this is the case, the number of shares allotted to the investor will be increased by 1 Ordinary Share for every £1 of commission waived.


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The Company may (following consultation with the Managers) change the availability and terms of initial commission applicable to applications received on or after a specified date payable to financial intermediaries through an announcement to the London Stock Exchange through a Regulatory Information Service provider authorised by the FSA . The Company may also provide or publish an amended application form to that set out in this document pursuant to which applications for Ordinary Shares under the Offer will be accepted.

ADDITIONAL INFORMATIONVCT Status MonitoringHMRC has given provisional approval of Social Impact VCT plc as a VCT. Wragge & Co LLP, as solicitors and VCT launch advisers to the Company, has advised on the VCT status of the Company and the Offer for the purposes of launch. Social Impact VCT has retained PricewaterhouseCoopers LLP to advise on tax matters generally and, in particular, the ongoing maintenance of VCT status. Final approval will be sought as soon as possible, and in any event no later than the end of the accounting period of 1 April 2013 to 31 March 2014, beginning 3 years after provisional approval. PricewaterhouseCoopers LLP will assist the Investment Manager in seeking confirmation of the status of investments as VCT qualifying holdings and monitoring progress towards achieving full VCT approval, but will report directly to the Board.

Whilst it is the intention of the Directors that Social Impact VCT will be managed so as to qualify as a VCT, there can be no guarantee that it will qualify or that such status will be maintained. A failure to meet the qualifying requirements could result in Social Impact VCT losing the tax reliefs previously obtained, resulting in adverse tax consequences for investors, including a requirement to repay the up front 30% income tax relief.

VCT regulationsIn order to obtain venture capital trust status, Social Impact VCT must be approved by HMRC. The conditions which must be satisfied to obtain and retain such status are set out in Part Three of this document.

Life of the Company Social Impact VCT is a planned exit VCT with a planned time period of 8 years.

The planned exit Social Impact VCT intends to commence the return of capital to investors from Year 6, with return of capital to be fully completed by Year 8. Accordingly, it is the current intention of the Directors to procure, at the 7th annual general meeting of the Company, that a special resolution is proposed requiring the Company to be wound up on the 8th anniversary of first allotment.

The majority of the investments of Social Impact VCT will have a maturity period of five years enabling the Company to exit such investments during its expected 8 year life.

In exceptional circumstances where it may not be beneficial to Shareholders to finalise the return of capital to Shareholders by the 8th anniversary, then the Directors will delay the return of capital to Shareholders beyond the 8th anniversary but the Company would still be expected to have a life not exceeding 10 years.

Category of potential investorsA typical investor for whom the Offer is designed is a UK higher rate income taxpayer 18 years of age or over with an investment range of between £2,000 and £200,000 who, having regard to the risk factors set out at the front of this document, considers the investment policy as detailed in Part One of this document to be attractive. This may include retail, institutional and sophisticated investors and high net worth individuals who already have a portfolio of non-VCT investments. Investment in a VCT may not be suitable for all investors and should be considered as a long term investment.

Before deciding whether to apply for Ordinary Shares under the terms of the Offer you are recommended to consult a duly authorised independent financial adviser.

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Part Two: Taxation Consideration for Investors1. TAX RELIEFSThe following is only a summary of the law concerning the tax position of individual qualifying investors in VCTs. Potential investors are recommended to consult a duly authorised independent financial adviser as to the taxation consequences of an investment in a VCT. The tax reliefs set out below are those currently available to UK resident individuals aged 18 or over who subscribe for Ordinary Shares under the Offer. Whilst there is no specific limit on the amount of an individual’s acquisition of shares in a VCT, tax reliefs will only be given to the extent that the total of an individual’s subscriptions or other acquisitions of shares in VCTs in any tax year do not exceed £200,000. Qualifying investors who intend to invest more than £200,000 in VCTs in any one tax year should consult their professional advisers. A qualifying investor is an individual aged 18 or over who satisfies the conditions of eligibility for tax relief available to investors in a VCT.

(a) Income Tax

(i) Relief from income tax on investment

A qualifying investor subscribing for Ordinary Shares will be entitled to claim income tax relief on amounts subscribed up to a maximum of £200,000 invested in VCTs in any tax year. To obtain relief a qualifying investor must subscribe on his own behalf. The relief is given at the rate of 30% on the amount subscribed regardless of whether the qualifying investor is a higher rate or basic rate tax payer, provided that the relief is limited to the amount which reduces the qualifying investor’s income tax liability to nil. Investments to be used as security for or financed by loans may not qualify for relief, depending on the circumstances.

(ii) Dividend relief

A qualifying investor who, in any tax year subscribes for VCT shares (including Ordinary Shares) having a value of up to a maximum of £200,000 will not be liable to income tax on dividends paid on those shares and there is no withholding tax thereon.

(iii) Purchasers in the market

A qualifying investor who purchases existing Ordinary Shares in the market will be entitled to claim dividend relief (as described in paragraph 1(a)(ii) above) but not relief from income tax on investment (as described in paragraph 1(a)(i) above).

(iv) Withdrawal of relief

Relief from income tax on a subscription for VCT shares (including Ordinary Shares) will be withdrawn if the VCT shares are disposed of (other than between spouses or on death) within five years of issue or if the VCT loses its approval within this period as detailed below. Dividend relief ceases to be available once the qualifying investor ceases to own the VCT shares in respect of which it has been given.

(b) Capital Gains Tax

(i) Relief from capital gains tax on the disposal of Ordinary Shares

A disposal by a qualifying investor of Ordinary Shares will give rise to neither a chargeable gain nor an allowable loss for the purposes of UK capital gains tax. The relief is limited to the disposal of VCT shares acquired within the limit of £200,000 for any tax year.

(ii) Purchasers in the market

An individual purchaser of existing Ordinary Shares in the market will be entitled to claim relief from capital gains tax on disposal (as described in paragraph b(i) above).


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(c) Loss of VCT approval

A company may be fully approved as a VCT or, to facilitate launch, provisionally approved to allow the company sufficient time to meet the various requirements for full approval as set out in Part Three of this document.

(i) Loss of full approval

If a company, which has been granted approval as a VCT, subsequently fails to comply with the conditions for approval, approval as a VCT may be withdrawn. In these circumstances, relief from income tax on the initial investment is repayable unless loss of approval occurs more than five years after the issue of the relevant VCT shares. In addition, relief ceases to be available on any dividend paid in respect of profits or gains in any accounting period ending when VCT status has been lost and any gains on the VCT shares up to the date from which loss of VCT status is treated as taking effect will be exempt, but gains thereafter will be taxable.

(ii) Loss of provisional approval

If a company which has been granted provisional approval as a VCT subsequently fails to comply with the conditions for full approval, such provisional approval as a VCT may be withdrawn and the effect is as if provisional approval had never been given. In these circumstances, therefore, relief from income tax on the initial investment is repayable, dividends paid and to be paid will be subject to income tax and any gains on the VCT shares will also be taxable on disposal.

2. INVESTORS NOT RESIDENT IN THE UKInvestors not resident in the UK should seek their own professional advice as to the consequences of making an investment in a VCT as they may be subject to tax in other jurisdictions as well as in the UK.

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Part Three: Conditions to be Met by Venture Capital TrustsThe Company has to satisfy a number of tests to qualify as a VCT. A summary of these tests is set out below.

1. QUALIFICATION AS A VCTTo qualify as a VCT, a company must be approved as such by HMRC. To obtain such approval it must:

(a) not be a close company;

(b) have each class of its ordinary share capital quoted on the London Stock Exchange;

(c) derive its income wholly or mainly from shares or securities;

(d) have at least 70% by VCT Value of its investments in shares or securities in Venture Capital Investments, of which 70% by VCT Value must be in eligible shares;

(e) have at least 10% by VCT Value of each Venture Capital Investment in eligible shares;

(f) not have more than 15% by VCT Value of its investments in a single company or group (other than a VCT or a company which would, if its shares were listed, qualify as a VCT); and

(g) not retain more than 15% of its income derived from shares and securities in any accounting period, and

(h) not make, or have made, any investment in breach of the £5 million limit described in paragraph 2 below.

‘Eligible shares’ means shares which do not carry any rights to be redeemed or a preferential right to assets on a winding-up or to dividends (in respect of the latter, where the right to the dividend is cumulative or, where the amount or dates of payment of the dividend may be varied by the company, a shareholder or any other person).

2. QUALIFYING INVESTMENTSA Qualifying Investment consists of shares or securities first issued to the VCT (and held by it ever since) by a company satisfying the conditions set out in Parts 3 and 4 of Chapter 6 of ITA. The conditions are detailed but include that the company must be a Qualifying Company, have gross assets not exceeding £15 million immediately before and £16 million immediately after the investment, apply the money raised for the purposes of a qualifying trade within certain time periods and not be controlled by another company. In certain circumstances, an investment in a company by a VCT can be split into a part which is a qualifying holding and a part which is a non-qualifying holding. In addition, to be qualifying holdings, VCT funds raised after 5 April 2007 must invest in companies which have no more than 250 full -time (equivalent) employees.

Whenever a VCT invests in a company, that company may not (when aggregated with the new investment to be made by the VCT) have received more than £ 5 million of investment from VCTs, and from individuals claiming relief under the Enterprise Incentive Scheme, and from certain forms of State-Aid in the prec eding 12 month period (see paragraph 1(h) above).

Monies invested by a VCT cannot be applied in funding the purchase of shares in other companies. Shares or securities issued to a VCT in connection with so-called “disqualifying arrangements” will not be qualifying holdings. For these purposes, “disqualifying arrangements” exist where the main (or one of the main purposes) of the arrangement is to offer access to the tax relief, but where either (i) the benefit of the investment is passed to another party, or (ii) the business activities of the investee company would otherwise be carried on by another party.

3. QUALIFYING COMPANIESA Qualifying Company must be unquoted (for VCT purposes this includes companies whose shares are traded on PLUS and AIM) and must carry on a qualifying trade. For this purpose certain activities are excluded (such as dealing in land or shares or providing financial services). The qualifying trade must either be carried on by, or be intended to be carried on by, the Qualifying Company or by a qualifying subsidiary at the time of the issue of shares or securities to the VCT (and at all times thereafter). The


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company must have a permanent establishment in the UK, but the company need not be UK resident. The company must not be in financial difficulty at the time the VCT invests in it. A company intending to carry on a qualifying trade must begin to trade within two years of the issue of shares or securities to the VCT and continue it thereafter.

A Qualifying Company may have no subsidiaries other than qualifying subsidiaries which must, in most cases, be at least 51% owned.

4. APPROVAL AS A VCTA VCT must be approved at all times by HMRC. Approval has effect from the time specified in the approval.

A VCT cannot be approved unless the tests detailed in paragraph 1 above are met throughout the most recent complete accounting period of the VCT and HMRC is satisfied that they will be met in relation to the accounting period of the VCT which is current when the application is made. However, where a VCT raises further funds, VCTs are given grace periods to invest those funds before such further funds become subject to the tests.

However, to aid the launch of a VCT, HMRC may give provisional approval if satisfied that conditions (b), (c), (f) and (g) in paragraph 1 above will be met throughout the current or subsequent accounting period and condition (d) in paragraph 1 above will be met in relation to an accounting period commencing no later than three years after the date of provisional approval.

The Company has obtained provisional approval as a VCT from HMRC.

5. WITHDRAWAL OF APPROVALApproval of a VCT (full or provisional) may be withdrawn by HMRC if the various tests set out above are not satisfied. The exemption from corporation tax on capital gains made by the VCT will not apply to any gain realised after the point at which VCT status is lost.

Withdrawal of approval generally has effect from the time when notice of withdrawal is given to the VCT but, in relation to capital gains of the VCT only, can be backdated to not earlier than the first day of the accounting period commencing immediately after the last accounting period of the VCT in which all of the tests were satisfied.

Withdrawal of provisional approval has effect as if provisional approval had never been given (including the requirement to pay corporation tax on prior gains).

The above is only a summary of the conditions to be satisfied for a company to be treated as a VCT.

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Part Four: Additional Information1. INCORPORATION AND ADMINISTRATION (a) The Company was incorporated and registered in England and Wales on 6 December 2011 with

limited liability as a public limited company under CA 2006 with the name Social Impact VCT plc and with registered number 7872956. The Company operates (and its shares are created) under CA 2006 and the regulations made thereunder. Its registered office is at 55 Colmore Row, Birmingham B3 2AS and its principal place of business is in the United Kingdom . The telephone number of the company secretary is 0131 243 7210. The Company is domiciled in the United Kingdom.

(b) The Company does not have, nor has it had since its incorporation, any subsidiaries, subsidiary undertakings or employees and it does not own any premises.

(c) The Company was issued with a certificate under section 761 of CA 2006 by the Registrar of Companies on 13 April 2012.

(d) Scott-Moncrieff has been the only auditor of the Company since its incorporation.

(e) HMRC has provisionally approved the Company under section 274 ITA and it is intended that the business of Social Impact VCT be carried on so as to comply with that section.

(f) The Company will be an investment company under section 833 of CA 2006. The Company will give notice to the Registrar of Companies pursuant to section 833 of CA 2006 of its intention to carry on business as an investment company. This will give the Company an additional basis on which to make a distribution, namely, out of its accumulated realised revenue profits (so far as not previously distributed or capitalised) less its accumulated revenue realised or unrealised losses (so far as not previously written off in a reduction or repayment of capital) subject to certain other conditions set out in section 832 of CA 2006. Assuming the Company achieves and maintains this status, the Company’s ability to make revenue distributions to its Shareholders will not be affected by a capital loss. However, a revenue loss could prevent an immediate distribution (in whole or in part) of a capital profit. The Directors, therefore, propose to cancel the amount standing in the Company’s share premium account to create a special reserve to which capital losses can be written off to enable the Company, should it revoke investment company status, to pay a capital dividend and to continue paying out revenues as and when it is able.

(g) The Company is not authorised and/or regulated by the FSA or an equivalent Overseas Regulator. The Company is subject to the requirements of VCTs and, as an entity listed on the main market of the London Stock Exchange, will be subject to the rules and regulations issued by the UK Listing Authority from time to time. The Company is not otherwise regulated.

2. SHARE CAPITAL(a) The Company’s share capital comprises of Ordinary Shares of 10p each and Redeemable

Shares of 100p each. On incorporation, two Ordinary Shares were taken nil paid by the original subscribers to the Memorandum, these being John Gregory and Jonathan Roe.

(b) To enable the Company to register as a public limited company and to obtain a certificate under section 761 of CA 2006, on 4 April 2012, 50,000 Redeemable Shares were allotted by the Company to Social Finance (25,000 Redeemable Shares) and FSE (25,000 Redeemable Shares) at par for cash, paid up as to one quarter of their nominal value. Such Redeemable Shares will be paid up in full and redeemed out of the proceeds of the Offer and the Articles amended by the deletion of all references to Redeemable Shares and the rights attaching to them.

(c) The following resolutions were passed by the Company on 25 October 2012:

(i) in substitution for existing authorities, the Directors were generally and unconditionally authorised in accordance with section 551 of CA 2006 to exercise all the powers of the Company to allot ordinary shares of 10p each in the Company (“Ordinary Shares”) and to grant rights to subscribe for or to convert any security into shares in the Company (“Rights”) up to an aggregate nominal amount of £2,200,000 , provided that, the authority


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conferred shall expire on the fifth anniversary of the date of the passing of this resolution (unless renewed, varied or revoked by the Company in a general meeting) but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require Ordinary Shares to be allotted or Rights to be granted after such expiry;

(ii) in substitution for existing authorities, the Directors were empowered pursuant to sections 570 and 573 of CA 2006 to allot or make offers or agreements to allot equity securities (which expression shall have the meaning as described to it in section 560(1) of CA 2006) for cash pursuant to the authority set out paragraph (i) above or by way of a sale of treasury shares, as if section 561(1) of CA 2006 did not apply to such allotment, provided that the power provided by this paragraph (ii) shall expire on the conclusion of the annual general meeting of the Company to be held in 2013 and provided further that this power shall be limited to:

(A) the allotment and issue of Ordinary Shares with an aggregate nominal value representing up to £2,000,000 in connection with the Offer;

and

(B) the allotment and issue of Ordinary Shares with an aggregate nominal value representing up to 10% of the issued Ordinary Share capital of the Company immediately following close of the Offer, where the proceeds may in whole or part be used to purchase Ordinary Shares;

(iii) in substitution for existing authorities, the Company was empowered to make one or more market purchases within the meaning of section 693(4) of CA 2006 of its own Ordinary Shares (either for cancellation or for the retention as treasury shares for future re-issue or transfer) provided that:

(A) the aggregate number of Ordinary Shares which may be purchased shall not exceed £750,000 ;

(B) the amount to be paid for an Ordinary Share shall be a sum equal to the last published net asset value of the Company per Ordinary Share on the date of purchase (such amount being both the maximum and minimum amount that may be paid for an Ordinary Share);

(C) the authority conferred shall expire on the conclusion of the annual general meeting of the Company to be held in 201 4 , unless such authority is renewed prior to such time; and

(D) the Company may make a contract to purchase Ordinary Shares under the authority conferred by this resolution prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of such Ordinary Shares; and

(iv) the amount standing to the credit of the share premium account of the Company, at the date an order is made confirming such cancellation by the court, be cancelled.

(d) Save as set out above, since the date of incorporation no share or loan capital of the Company has been issued or agreed to be issued or (except pursuant to the Offer) is now proposed to be issued, for cash or any other consideration, and no commissions, discounts, brokerages or other special terms have been granted by the Company in connection with the issue or sale of any such capital except as disclosed herein. The Company has no contingent liabilities.

(e) The Company will be subject to the continuing obligations of the Listing Rules with regard to the issue of securities for cash and the provisions of section 561(1) of CA 2006 (which confers on shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash) will apply to the unissued share capital of the Company which is not subject to the Disapplication referred to in paragraph 2(c) above.

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(f) The Ordinary Shares are/will be in registered form and no temporary documents of title will be issued. The Company will be applying to Euroclear for the Ordinary Shares to be admitted to CREST, a paperless settlement system and those Shareholders who wish to hold their Ordinary Shares in electronic form may do so.

(g) The issued share capital of the Company at the date of this document is 2 Ordinary Shares ( nil paid) and 50,000 Redeemable Shares (paid up as to one quarter).

(h) Following the issue of the Ordinary Shares pursuant to the Offer (assuming full subscription) the issued share capital of the Company is expected to be:

Number (£)

Ordinary Shares 20,000,002 20,000,000.20

3. DIRECTORS’ AND OTHERS’ INTERESTS IN THE COMPANY (a) Save as set out in paragraph 3(d) below, as at 12 November 2012 (this being the latest practicable

date prior to publication of this document), the Company is not aware of any person who, directly or indirectly, has an interest (or will have an interest following Admission) in the Company’s capital or voting rights which is notifiable under UK law (under which, pursuant to CA 2006 and the Listing Rules and the Disclosure & Transparency Rules of the FSA, a holding of 3% or more must be notified to the Company).

(b) So far as is known to the Company, there is no person, other than a member of the administrative, management or supervisory bodies who, directly or indirectly, has an interest in the capital or voting rights of the Company as at the date of this document or immediately following Admission, except for John Gregory and Jonathan Roe, who both own one Ordinary Share in the Company prior to Admission. None of the major holders of Ordinary Shares have voting rights different from other holders of Ordinary Shares. The Company only has, other than Redeemable Shares (the rights of which are set out in paragraph 4(a)(i) below, one class of share and therefore there are no differing rights attaching to any class of share.

(c) There are no persons, so far as known to the Company, who, directly or indirectly, jointly or severally, exercise or could exercise control over the Company. This includes, for these purposes, joint control meaning control exercised by two or more persons who have concluded an agreement which may lead to their adopting a common policy in respect of the Company.

(d) At the date of this document:

(i) John Gregory and Jonathan Roe hold 1 Ordinary Share each;

(ii) none of the other Directors (or any of their immediate family members) have any interest in any Ordinary Shares.

The Directors intend to invest in the Offer for the following number of Ordinary Shares:

Director Number of Ordinary Shares

Percentage of issued share capital*

Jeremy Delmar-Morgan 10,000 0.050%

John Gregory 10,000 0.050%

Jonathan Roe 20,000 0.100%

Mark Mansley 10,000 0.050%* Assuming full subscription under the Offer and the Redeemable Shares having been redeemed.

Save as disclosed above, none of the Directors (nor any member of their respective immediate families) has any interests whether beneficial or non-beneficial in the share or loan capital of the Company which are, or would immediately following the Offer be required to be, notified under section 809 CA 2006 or the Disclosure and Transparency Rules or are interests of a connected


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person of a Director (within the meaning of section 252 CA 2006) which would, if the connected person were a Director, be required to be disclosed, and the existence of which is known to or could with reasonable diligence be ascertained by that Director.

(e) Save as noted in paragraph 3(d), no Ordinary Shares are being reserved for allocation to existing Shareholders or Directors.

(f) The Directors were appointed under letters of appointment dated 12 November 2012. The appointments are subject to an initial period expiring immediately following the first annual general meeting of the Company, and (subject to re-election at that first annual general meeting) thereafter the appointments may be terminated on six months’ notice. No arrangements have been entered into by the Company entitling the Directors to compensation for loss of office, nor have any amounts been set aside to provide pension, retirement or similar benefits. Other than the letters of appointment, there are no service contracts between the Company and any of the Directors.

(g) The maximum fees (including applicable VAT and employers’ National Insurance Contributions) payable to the Directors, which take effect from the date of the first allotment under the Offer, and are as follows:

Directors Current Annual Fees(£)

John Gregory 10,000

Jeremy Delmar-Morgan 10,000

Jonathan Roe 10,000

Mark Mansley 10,000

(h) No loan or guarantee has been granted or provided by the Company to or for the benefit of any Director.

(i) None of the Directors nor any members of their respective immediate families has any private interest which is or has the potential of being a conflict of interest in relation to the Company.

(j) Save as set out in paragraph 3(g), none of the Directors or any member of their respective immediate families has or has had an interest in any transaction or transactions which are or were unusual in their nature or conditions or significant to the business of the Company and which were effected by the Company since its incorporation and remains in any respect outstanding or unperformed.

(k) No remuneration or benefits are, to date, payable to the Directors. It is estimated that the aggregate amount payable to the Directors by the Company for the financial period ending on 31 March 201 4 under the arrangements in force at the date of this document will not exceed £40,000 ( inclusive of VAT, employers’ National Insurance Contributions and expenses).

(l) The Company will maintain directors’ and officers’ liability insurance for the benefit of its Directors.

(m) The Directors are currently or have been within the last five years, a member of the administrative, management or supervisory bodies or a partner of the companies or partnerships mentioned below:

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Director Current Past

John Gregory Foresight VCT PLCSphere Medical Holding PlcMeaujo Tug LtdMeaujo Bell LtdTixal Ltd

IS Pharma plcSinclair IS Pharm a plcEnterpri se VCT plcForesight 3 VCT plcBluehone AiM VCT plcThe 1855 Club plcEpic VCT plcThe Centre for Accessible EnvironmentsLocal Allotments plcLiquid Lens Europe Ltd

Jeremy Delmar-Morgan Seven Hills Venture Partners LimitedBraveheart Investment Group PLCBraveheart Ventures LimitedDaylight Investment Services Company LimitedLondon Symphony Orchestra Endowment Trust

Teawood Nominees LimitedTeathers LimitedLondon Symphony Orchestra LimitedEagle Crown Productions LimitedReligare Capital Markets PLCMeadway Houses (Winchester) LimitedJEM (Developments) LimitedAllenby Capital Limited

Mark Mansley The Ethical AIM VCT Plc

Jonathan Roe JC Roe Consulting LimitedRoehampton Club Members LimitedRoehampton Club LimitedVanquis Bank Limited

(n) Save as disclosed in paragraph 3(o), none of the persons mentioned in paragraph 3(m) above has for at least the previous five years:

(i) any convictions in relation to fraudulent offences;

(ii) been associated with any bankruptcies, receiverships or liquidations in relation to an entity for which they have been acting as members of the administrative, management or supervisory bodies or were a partner with unlimited liability (in the case of a limited partnership with share capital), founder or a senior manager who was relevant to establishing that that entity had the appropriate expertise and experience for the management of its business;

(iii) been subject to any official public incrimination and/or sanctions by statutory or regulatory authorities (including designated professional bodies); or

(iv) been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer.

(o) John Gregory was a non-executive director of Enterprise VCT plc. Enterprise VCT plc merged with Foresight 3 VCT Plc pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986 under which Enterprise VCT plc (“Enterprise”) was placed into members voluntary liquidation and the assets and liabilities of Enterprise were transferred to Foresight 3 VCT Plc in exchange for shareholders in Enterprise receiving new Shares in Foresight 3 VCT Plc. This scheme of construction was implemented on 2 September 2008.


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John Gregory was a non-executive director of Bluehone AiM VCT plc. Bluehone AiM VCT plc merged with Bluehone AiM VCT2 plc pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986 under which Bluehone AiM VCT plc (“Bluehone”) was placed into members voluntary liquidation and the assets and liabilities of Bluehone were transferred to Bluehone AiM VCT2 plc in exchange for shareholders in Bluehone receiving new Shares in Bluehone AiM VCT2 plc. This scheme of construction was implemented on 23 July 2008.

(p) Mark Mansley was a director of The Ethical AIM VCT plc, the UK’s first ethical VCT. The Ethical AIM VCT Plc merged with Pennine Downing AIM 2 VCT Plc pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986 under which The Ethical AIM VCT Plc (“Ethical”) was placed into members voluntary liquidation and the assets and liabilities of Ethical were transferred to Pennine Downing AIM VCT 2 Plc in exchange for shareholders in Ethical receiving new Shares in Pennine Downing AIM VCT 2 Plc. This scheme of construction was implemented on 16 January 2008.

4. MEMORANDUM AND ARTICLESThe objects of the Company are not limited by any provisions of the Memorandum or the Articles of the Company.

The following is a summary of the current Articles. In this paragraph 4, reference to ‘‘Directors’’ means the directors of the Company from time to time, reference to the ‘‘Board’’ means the board of directors of the Company from time to time and reference to “the Act” means CA 2006 as the context permits as amended from time to time.

(a) Share Capital

(i) The Company may issue shares which are liable to be redeemed on such terms and conditions as the Board may determine.

(A) The holders of the Redeemable Shares shall be entitled to receive from the profits of the Company available for a distribution in priority to any other dividend or distribution a fixed annual non-cumulative dividend of one pence per Redeemable Share held by them, the first such dividend being payable in respect of the first financial period of the Company commencing after 31 October 2012. Subject thereto the Redeemable Shares shall not confer upon their holders any entitlement to participate in any dividend or other distribution of the profits of the Company.

(B) On a return of assets (except on a redemption of shares) on liquidation or otherwise, the assets of the Company remaining after payment of its liabilities shall be applied in priority to any other payment in paying to the holders of Redeemable Shares a sum equal to the amount p aid up thereon and all arrears and accruals of dividends thereon. Subject thereto the Redeemable Shares shall not confer any entitlement on their holders to participate any further in the surplus assets of the Company.

(C) The Company may redeem the Redeemable Shares at any time. The holders of the Redeemable Shares may require that the Company redeem all the Redeemable Shares at any time after the earlier of 31 October 2012 and the date of first admission of the Ordinary Shares to the Official List. On redemption, the holders of the Redeemable Shares shall be entitled to receive an amount equal to the amount paid up on the Redeemable Shares redeemed together with all arrears and accruals of dividends thereon.

(D) The Redeemable Shares shall not confer on the holders of them, any entitlement to receive notice of, attend or vote at general meetings of the Company.

(E) Notwithstanding the provisions of the Articles, on a return of assets on liquidation, redemption or otherwise the holders of the Redeemable Shares shall not be entitled to receive in aggregate an amount which exceeds one half of the assets of the Company which would then be available for distribution among participators.

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(ii) Shareholders shall have the right to receive notice of, attend and vote at all general meetings.

(iii) If any shareholder, or any other person appearing to the Directors to be interested in any shares in the capital of the Company held by such shareholder, has been duly served with a notice under section 793 CA 2006 and is in default for a period of 14 days from the date of service of the notice in supplying to the Company the information thereby required, then the Company may (at the absolute discretion of the Directors) at any time thereafter by notice (a “restriction notice”) to such shareholder direct that, in respect of the shares in relation to which the default occurred and any other shares held at the date of the restriction notice by the shareholder, or such of them as the Directors may determine from time to time (the “restricted shares” which expression shall include any further shares which are issued in respect of any restricted shares), the shareholder shall not, nor shall any transferee to which any of such shares are transferred other than pursuant to a permitted transfer, be entitled to be present or to vote on any question, either in person or by proxy, at any general meeting of the Company or separate general meeting of the holders of any class of shares of the Company, or to be reckoned in a quorum.

(iv) Where the restricted shares represent at least 0.25% in nominal value of the issued shares of the same class as the restricted shares (excluding any shares of that class held as treasury shares) the restriction notice may in addition direct, inter alia, that any dividend or other money which would otherwise be payable on the restricted shares shall be retained by the Company without liability to pay interest; any election by such member to receive shares instead of cash in respect of any dividends on such restricted shares will not be effective; and no transfer of any of the shares held by the shareholder shall be registered unless the shareholder is not himself in default in supplying the information requested and the transfer is part only of the member’s holding and is accompanied by a certificate given by the member in a form satisfactory to the Directors to the effect that after due and careful enquiry the member is satisfied that none of the shares which are the subject of the transfer are restricted shares.

(v) The Board shall be entitled to make calls for the sums, if any, remaining unpaid on any shares, subject to the terms of allotment of such shares. If any call remains unpaid then the Board may, after giving not less than 14 clear days’ notice, forfeit such share and sell or transfer such forfeited shares on such terms as the Board may determine.

(b) General Meetings

(i) Convening of General Meetings

The Board shall convene annual general meetings and may convene other general meetings whenever it thinks fit. A general meeting shall also be convened on such requisition or in default may be convened by such requisitionists as provided by the Act. At any meeting convened on such requisition or by such requisitionists no business shall be transacted except that stated by the requisition or proposed by the Board. If there are not within the UK sufficient members of the Board to convene a general meeting, any Director may call a general meeting. The Board may make arrangements to ensure the orderly conduct of general meetings and to preserve the security of attendees.

(ii) Notice of General Meeting

General meetings shall be convened by the minimum period of notice required by the Act.

Every notice convening a general meeting shall specify:

(A) whether the meeting is an annual general meeting or an extraordinary general meeting;

(B) the place, the day and the time of the meeting;

(C) in the case of special business the general nature of that business;

(D) if the meeting is convened to consider a special resolution the text of the resolution and the intention to propose the resolution as such; and


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(E) with reasonable prominence that a member entitled to attend and vote is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him and that a proxy need not also be a member.

(iii) Omission to Send Notice

The accidental omission to send a notice of meeting or, in cases where it is intended that it be sent out with the notice, an instrument of proxy or any other document, to, or the non-receipt of either by, any person entitled to receive the same shall not invalidate the proceedings at that meeting.

(iv) Quorum at General Meetings

No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business but the absence of a quorum shall not preclude the choice or appointment of a chairman which shall not be treated as part of the business of the meeting. 2 persons entitled to attend and to vote on the business to be transacted, each being a member present in person or a proxy for a member or a duly authorised representative of a corporation which is a member, shall be a quorum. If within 15 minutes (or such longer interval as the Chairman in his absolute discretion thinks fit) from the time appointed for the holding of a general meeting a quorum is not present, or if during a meeting such a quorum ceases to be present, the meeting, if convened on the requisition of members, shall be dissolved. In any other case, the meeting shall stand adjourned to the same day in the next week at the same time and place, or to such other day and at such time and place as the Chairman (or, in default, the Board) may determine, being not less than 10 clear days thereafter. If at such adjourned meeting a quorum is not present within 15 minutes from the time appointed for holding the meeting one member present in person or by proxy or (being a corporation) by a duly authorised representative shall be a quorum. If no such quorum is present or if during the adjourned meeting a quorum ceases to be present, the adjourned meeting shall be dissolved.

(v) Method of Voting

At any general meeting a resolution put to a vote of the meeting shall be decided on a show of hands unless (before or immediately after the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded by:

(A) the chairman of the meeting; or

(B) at least 5 members present in person or by proxy having the right to vote at the meeting; or

(C) a member or members present in person or by proxy representing not less than one tenth of the voting rights of all the members having the right to vote at the meeting; or

(D) a member or members present in person or by proxy holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one tenth of the total sum paid up on all the shares conferring that right.

(vi) Votes of Members

Subject to the provisions of the Act and to any special terms as to voting on which any shares may have been issued or may for the time being be held and to any suspension or abrogation of voting rights pursuant to the Articles, at any general meeting every member who (being an individual) is present in person or by proxy or (being a corporation) is present by a duly authorised representative, not being himself a member entitled to vote, shall on a show of hands have one vote and on a poll shall have one vote for each share of which he is the holder.

(vii) Variation of Class Rights

Subject to the provisions of the Act, if at any time the share capital of the Company is divided into shares of different classes any of the rights for the time being attached to any share or

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class of shares in the Company (and notwithstanding that the Company may be or be about to be in liquidation) may (unless otherwise provided by the terms of issue of the shares of that class) be varied or abrogated in such manner (if any) as may be provided by such rights or, in the absence of any such provision, either with the consent in writing of the holders of not less than three quarters in nominal value of the issued shares of the class or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of the class duly convened and held as provided in these Articles (but not otherwise).

All the provisions in the Articles as to general meetings shall mutatis mutandis apply to every meeting of the holders of any class of shares save that the quorum at every such meeting shall be not less than 2 persons holding or representing by proxy at least one-third of the nominal amount paid up on the issued shares of the class; every holder of shares of the class present in person or by proxy may demand a poll; each such holder shall on a poll be entitled to one vote for every share of the class held by him; and if at any adjourned meeting of such holders, such quorum as aforesaid is not present, not less than one person holding shares of the class who is present in person or by proxy shall be a quorum.

(viii) Consolidation and Subdivision

The Company in general meeting may from time to time by ordinary resolution:

(A) consolidate and divide all or any of its share capital into shares of larger nominal amount than its existing shares; and

(B) subject to the provisions of the Act, sub-divide its shares or any of them into shares of smaller nominal value and may by such resolution determine that, as between the shares resulting from such sub-division, one or more of the shares may, as compared with the others, have any such preferred, deferred or other special rights or be subject to any such restrictions as the Company has power to attach to unissued or new shares but so that the proportion between the amount paid up and the amount (if any) not paid up on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived.

(c) Transfer of Shares

(i) Form of Transfer

Except as may be provided by any procedures implemented for shares held in uncertificated form, each member may transfer all or any of his shares by instrument of transfer in writing in any usual form or in any form approved by the Board. Such instrument shall be executed by or on behalf of the transferor and (in the case of a transfer of a share which is not fully paid up) by or on behalf of the transferee. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect of it.

(ii) Right to Refuse Registration

The Board may in its absolute discretion refuse to register any share transfer (as to which it shall provide reasons) unless:

(A) it is in respect of a share which is fully paid up;

(B) it is in respect of only one class of shares;

(C) it is in favour of a single transferee or not more than four joint transferees;

(D) it is duly stamped (if so required); and

(E) it is delivered for registration to the registered office of the Company, or such other place as the Board may from time to time determine, accompanied (except in the case of a transfer by a recognised person where a certificate has not been issued) by the certificate for the shares to which it relates and such other evidence as the Board may reasonably require to prove the title of the transferor and the due execution by him of the transfer or if the transfer is executed by some other person on his behalf, the


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authority of that person to do so, provided that such discretion may not be exercised in such a way as to prevent dealings in shares admitted to the Official List from taking place on an open and proper basis.

(d) Dividends and Other Payments

(i) Declaration of Dividends

Subject to the provisions of the Act and of the Articles, the Company may by ordinary resolution declare that, out of profits available for distribution, dividends be paid to members according to their respective rights and interests in the profits of the Company available for distribution. However, no dividend shall exceed the amount recommended by the Board.

(ii) Entitlement to Dividends

(A) Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up (otherwise than in advance of calls) on the shares on which the dividend is paid. Subject as aforesaid, all dividends shall be apportioned and paid pro rata according to the amounts paid up or credited as paid up on the shares during any portion or portions of the period in respect of which the dividend is paid but if any share is issued on terms providing that it shall rank for dividend as from a particular date or be entitled to dividends declared after a particular date it shall rank for or be entitled to dividends accordingly.

(B) All dividends and interest shall be paid (subject to any lien of the Company) to those members whose names shall be on the register at the date at which such dividend shall be declared or at the date at which such interest shall be payable respectively, or at such other date as the Company by ordinary resolution or the Board may determine, notwithstanding any subsequent transfer or transmission of shares.

(C) The Board may pay the dividends or interest payable on shares in respect of which any person is by transmission entitled to be registered as holder to such person upon production of such certificate and evidence as would be required if such person desired to be registered as a member in respect of such shares.

(e) Borrowing Powers

(i) Subject as provided in the Articles, the Board may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present or future) and uncalled capital of the Company and, subject to the provisions of the Act, to issue debentures and other securities whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

(ii) The Board shall restrict the borrowings of the Company and exercise all voting and other rights and powers of control exercisable by the Company in respect of its subsidiaries so as to procure (as regards its subsidiaries in so far as it can procure by such exercise) that the aggregate principal amount at any one time outstanding in respect of net monies borrowed (as defined at (e)(v)) by the Group (as defined in the Articles as the Company and its subsidiaries from time to time) (exclusive of monies borrowed by one Group company from another and after deducting cash deposited (as defined at (e)(iv)) shall not at any time without the previous sanction of an ordinary resolution of the Company exceed an amount equal to 20% of the value of the Adjusted Capital and Reserves (as defined at (e)(iii)).

(iii) “Adjusted Capital and Reserves” means a sum equal to the aggregate from time to time of:

(A) the amount paid up (or credited as paid up) on the allotted or issued share capital of the Company; and

(B) the amount standing to the credit of the reserves, whether or not distributable (including, without limitation, share premium account or capital redemption reserve), after adding thereto or deducting therefrom any balance standing to the credit or debit of the profit and loss account; all as shown in the relevant balance sheet, but after:

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(C) making such adjustments as may be appropriate to reflect:

(1) any variation in the amount of the paid up share capital and the amount standing to the credit of any of such reserves since the date of the relevant balance sheet and so that for the purpose of making such adjustments, if any proposed allotment of shares by the Company for cash has been underwritten, then such shares shall be deemed to have been allotted and the amount (including the premium) of the subscription monies payable in respect thereof (not being monies payable later than six months after the date of allotment) shall be deemed to have been paid up to the extent so underwritten on the date when the issue of such shares was underwritten (or, if such underwriting was conditional, the date on which it became unconditional);

(2) any variation since the date of the relevant balance sheet of the companies comprising the Group;

(D) excluding (so far as not already excluded):

(1) amounts attributable to the proportion of the issued equity share capital of any subsidiary undertaking which is not attributable, directly or indirectly, to the Company;

(2) any sum set aside for taxation (other than deferred taxation);

(E) deducting:

(1) sums equivalent to the book values of goodwill and other intangible assets shown in the relevant balance sheet; and

(2) the amount of any distribution declared, recommended or made by any Group company to a person other than a Group company out of profits accrued up to and including the date of (and not provided for in) the relevant balance sheet;

(iv) “cash deposited” means an amount equal to the aggregate of the amounts beneficially owned by Group companies which are deposited for the time being with any bank or other person (not being a Group company) and which are repayable to any Group company on demand or within three months of such demand, subject, in the case of amounts deposited by a partly-owned subsidiary undertaking, to the exclusion of a proportion thereof equal to the proportion of its issued equity share capital which is not attributable, directly or indirectly, to the Company;

(v) “monies borrowed” include not only monies borrowed but also the following except in so far as otherwise taken into account:

(A) the nominal amount of any issued share capital and the principal amount of any debenture or borrowings of any person, the beneficial interest in which or right to repayment to which is not for the time being owned by a Group company but the payment or repayment of which is the subject of a guarantee or indemnity by a Group company or is secured on the assets of a Group company;

(B) the principal amount raised by any Group company by acceptances or under any acceptance credit opened on its behalf by any bank or acceptance house (not being a Group company) other than acceptances and acceptance credits relating to the purchase of goods or services in the ordinary course of trading and outstanding for six months or less;

(C) the principal amount of any debenture (whether secured or unsecured) of any Group company owned otherwise than by a Group company;

(D) the principal amount of any preference share capital of any subsidiary undertaking owned otherwise than by a Group company;

(E) any fixed or minimum premium payable on final repayment of any borrowing or deemed borrowing (but any premium payable on final repayment of an amount not to be taken into account as monies borrowed shall not be taken into account); and


56

(F) any fixed amount in respect of a hire-purchase agreement or of a finance lease payable in either case by a Group company which would be shown at the material time as an obligation in a balance sheet prepared in accordance with the accounting principles used in the preparation of the relevant balance sheet (and for the purpose of this sub-paragraph (6) “finance lease” means a contract between a lessor and a Group company as lessee or sub-lessee where substantially all the risks and rewards of the ownership of the asset leased or sub-leased are to be borne by that company and “hire purchase agreement” means a contract of hire purchase between a hire-purchase lender and a Group company as hirer);

but do not include:

(G) monies borrowed by any Group company for the purpose of repaying, within six months of being first borrowed, the whole or any part of any monies borrowed and then outstanding (including any premium payable on final repayment) of that or any other Group company pending their application for such purpose within that period;

(H) monies borrowed by any Group company for the purpose of financing any contract in respect of which any part of the price receivable under the contract by that or any other Group company is guaranteed or insured up to an amount equal to that part of the price receivable under the contract which is so guaranteed or insured;

(I) an amount equal to the monies borrowed of any company outstanding immediately after it becomes a Group company, provided that it became a Group company during the six months preceding the calculation;

(J) an amount equal to the amount secured on an asset immediately after it was acquired by a Group company, provided that it was acquired during the six months preceding the calculation;

(K) notwithstanding sub-paragraph (1) to (6) above, the proportion of monies borrowed by a Group company (and not owing to another Group company) which is equal to the proportion of its issued equity share capital not attributable, directly or indirectly, to the Company;

(L) the amount of any monies borrowed which are for the time being deposited with any governmental authority in any part of the world in connection with import deposits or any similar governmental scheme to the extent that the Group company making such deposit retains its interest in such deposit; and

(M) any sum advanced or paid to any Group company (or its agents or nominees) by customers of any Group company as unexpended customer receipts or progress payments pursuant to any contract between such customer and a Group company; and in sub-paragraphs (7) to (13) above references to amounts of monies borrowed include references to amounts which, but for the exclusion under those sub-paragraphs, would fall to be included;

(vi) “relevant balance sheet” means the latest published audited consolidated balance sheet of the Group but, where the Company has no subsidiary undertakings, it means the balance sheet and profit and loss account of the Company and, where the Company has subsidiary undertakings but there are no consolidated accounts of the Group, it means the respective balance sheets and profit and loss accounts of the companies comprising the Group;

(vii) “subsidiary undertaking” means a subsidiary undertaking (within the meaning of the Companies Acts) of the Company (except a subsidiary undertaking which is excluded from consolidation by virtue of the provisions of section 405 of CA 2006); and “Group” and “Group company” and references to any company which becomes a Group company or to companies comprising the Group shall, in such a case, be construed so as to include subsidiary undertakings (except a subsidiary undertaking which is excluded from consolidation as aforesaid) and “equity share capital” shall be construed in relation to a

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subsidiary undertaking without a share capital in the same manner as “shares” are defined in relation to an undertaking without a share capital under section 1161(2)(a)) of CA 2006.

(viii) When the aggregate amount of monies borrowed required to be taken into account for the purposes of this Article 114 on any particular day is being ascertained, any of such monies denominated or repayable in a currency other than sterling shall be converted for the purpose of calculating the sterling equivalent either:

(A) at the rate of exchange used for the conversion of that currency in the relevant balance sheet; or

(B) if no rate was so used, at the middle market rate of exchange prevailing at the close of business in London on the date of that balance sheet; or

(C) where the repayment of such monies is expressly covered by a forward purchase contract, currency option, back-to-back loan, swap or other arrangements taken out and entered into to reduce the risk associated with fluctuations in exchange rates, at the rate of exchange specified in that document; but if the amount in sterling resulting from conversion at that rate would be greater than that resulting from conversion at the middle market rate prevailing in London at the close of business on the business day immediately preceding the day on which the calculation falls to be made, the latter rate shall apply instead.

(ix) A report or certificate of the auditors of the Company as to the amount of Adjusted Capital and Reserves or the amount of monies borrowed falling to be taken into account for the purposes of this article or to the effect that the limit imposed by this article has not been or will not be exceeded at any particular time or times or as a result of any particular transaction or transactions shall be conclusive evidence of the amount or of that fact.

(x) No debt incurred or security given in respect of monies borrowed in excess of the limit imposed by this article shall be invalid or ineffectual except in the case of express notice to the lender or recipient of the security at the time when the debt was incurred or security given that the limit had been or would thereby be exceeded but no lender or other person dealing with the Company shall be concerned to see or enquire whether such limit is observed.

(f) Directors

(i) Unless otherwise determined by the Company the maximum number of directors shall be 10 and the minimum shall be 2. The quorum for meetings of the Board shall be 2 and the Chairman shall have a second or casting vote on a tie.

(ii) The Directors shall be entitled to be paid fees for their services as Directors on such sums as the Board may determine from time to time but not exceeding £100,000 (or such larger amount as the Company may determine) per annum.

(iii) Each Director may appoint as an alternate Director either another Director or a person approved by the Board and to terminate such appointment.

(iv) At every annual general meeting, there shall retire from office any Director who shall have been a Director at each of the preceding two annual general meetings and who was not appointed or reappointed by the Company in general meeting at, or since, either such meeting. A retiring Director shall be eligible for re-appointment. A Director retiring at a meeting shall, if he is not re-appointed at such meeting, retain office until the meeting appoints someone in his place, or if it does not do so, until the conclusion of such meeting.

(g) Directors’ Interests

(i) Conflicts of Interest Requiring Board Authorisation

The Board may, provided the quorum and voting requirements set out below are satisfied, authorise any matter that would otherwise involve a Director breaching his duty under the


58

Act to avoid conflicts of interest except that the Director concerned and any other Director with a similar interest:

(A) shall not count towards the quorum at the meeting at which the conflict is considered; and

(B) the resolution will only be valid if it would have been agreed to if his vote had not been counted.

(ii) Where the Board gives authority in relation to such a conflict:

(A) the Board may (whether at the time of giving the authority or at any time or times subsequently) impose such terms upon the Director concerned and any other Director with a similar interest as it may determine, including, without limitation, the exclusion of that Director and any other Director with a similar interest from the receipt of information, or participation in discussion (whether at meetings of the Board or otherwise) related to the conflict;

(B) the Director concerned and any other Director with a similar interest will be subject to any terms imposed by the Board from time to time in relation to the conflict;

(C) any authority given by the Board in relation to a conflict may also provide that where the Director concerned and any other Director with a similar interest obtains information that is confidential to a third party, the Director will not be obliged to disclose that information to the Company, or to use the information in relation to the Company’s affairs, where to do so would amount to a breach of that confidence;

(D) the Board may withdraw such authority at any time.

(iii) Directors are obliged to declare any material interest which they may have in any transaction or arrangement involving the Company. Such directors shall not vote or be counted in the quorum in relation to any resolution to concerning any transaction or arrangement in which he is to his knowledge materially interested save that 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) any contract in which he is interested by virtue of an interest in shares, debentures or other securities of the Company or otherwise in or through the Company;

(B) the giving of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of or for the benefit of the Company or any of its subsidiary undertakings;

(C) a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the giving of security;

(D) any proposal concerning an offer of securities of or by the Company or any of its subsidiary undertakings in which offer he is, or may be entitled to, participate as a holder of securities or in the underwriting or sub-underwriting of which he is to participate;

(E) any contract, arrangement, transaction or other proposal concerning any other body corporate in which he, or any other person connected with him is interested, directly or indirectly and whether as an officer or shareholder otherwise howsoever, provided that he or any person connected with him do not hold an interest in 1% or more of any class of the equity share capital of such body corporate or of the voting rights available to members of the relevant body corporate;

(F) any contract, arrangement, transaction or other proposal for the benefit of employees of the Company which does not accord him any privilege or benefit not generally accorded to the employees to whom the scheme relates; and

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(G) any contract, arrangement or transaction concerning any insurance which the Company is to purchase and/or maintain for, or for the benefit of, any Directors or persons including Directors.

If any question shall arise at any meeting as to an interest or as to the entitlement of any Director to vote such question shall be referred to the chairman of the meeting and his ruling in relation to any Director other than himself 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.

(iv) Director may have Interests

Subject to the provisions of the Act and further provided that a Director declares his interest, a Director, notwithstanding his office:

(A) may be a party to or otherwise be interested in any transaction or arrangement with the Company or in which the Company is otherwise interested, either in regard to his tenure of any office or place of profit or as vendor, purchaser or otherwise;

(B) may hold any other office or place of profit under the Company (except that of auditor (being the auditor of the Company from time to time) or of auditor of a subsidiary of the Company) in conjunction with the office of Director and may act by himself or through his firm in a professional capacity for the Company and in any such case on such terms as to remuneration and otherwise as the remuneration committee may arrange either in addition to or in lieu of any remuneration provided for by any other article;

(C) may be a member of or a director or other officer, or employed by, or a party to any transaction or arrangement with or otherwise interested in, any body corporate promoted by or promoting the Company or in which the company is otherwise interested or as regards which the Company has any powers of appointment; and

(D) shall not, by reason of his office, be liable to account to the Company for any dividend, profit, remuneration, superannuation payment or other benefit which he derives from any such office, employment, contract, arrangement, transaction or proposal or from any interest in any such body corporate; and no such contract, arrangement, transaction or proposal shall be avoided on the grounds of any such interest or benefit.

(h) Untraced Members

(i) The Company shall be entitled to sell at the best price reasonably obtainable any share of a member or any share to which a person is entitled by transmission if and provided that:

(A) during the period of 12 years prior to the date of the publication of the advertisements referred to below (or if published on different dates, the earlier or earliest of them) the Company has paid at least 3 dividends and no cheque, order or warrant has been cashed;

(B) on or after expiry of the said period of 12 years the Company has given notice of its intention to sell such share by advertisements in both a national daily newspaper published in the UK and in a newspaper circulating in the area in which the last known address of such member or person appeared;

(C) the said advertisements, if not published on the same day, shall have been published within 30 days of each other; and

(D) during the further period of 3 months following the date of publication of the said advertisements (or, if published on different dates the later or latest of them) and prior to the exercise of the power of sale the Company has not received any communication in respect of such share from the member or person entitled by transmission.

(ii) To give effect to any sale of shares pursuant to this article the Board may authorise some person to transfer the shares in question and may enter the name of the transferee in respect


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of the transferred shares in the register notwithstanding the absence of any share certificate being lodged in respect of it and may issue a new certificate to the transferee. An instrument of transfer executed by that person shall be as effective as if it had been executed by the holder of, or the person entitled by transmission to, the shares. The purchaser shall not be bound to see to the application of the purchase moneys nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.

(i) Distribution of Realised Capital Profits

At any time when the Company has given notice in the prescribed form (which has not been revoked) to the registrar of companies of its intention to carry on business as an investment company (a “Relevant Period”) distribution of the Company’s capital profits (within the meaning of section 833 of the Act shall be prohibited. The Board shall establish a reserve to be called the capital reserve. During a Relevant Period all surpluses arising from the realisation or revaluation of investments and all other monies realised on or derived from the realisation, payment off of or other dealing with any capital asset in excess of the book value thereof and all other monies which are considered by the Board to be in the nature of accretion to capital shall be credited to the capital reserve. Subject to the Act, the Board may determine whether any amount received by the Company is to be dealt with as income or capital or partly one way and partly the other. During a Relevant Period, any loss realised on the realisation or payment off of or other dealing with any investments or other capital assets and, subject to the Act, any expenses, loss or liability (or provision thereof) which the Board considers to relate to a capital item or which the Board otherwise considers appropriate to be debited to the capital reserve shall be carried to the debit of the capital reserve. During a Relevant Period, all sums carried and standing to the credit of the capital reserve may be applied for any of the purposes for which sums standing to any revenue reserve are applicable except and provided that notwithstanding any other provision of these Articles during a Relevant Period no part of the capital reserve or any other money in the nature of accretion to capital shall be transferred to the revenue reserves of the Company or be regarded or treated as profits of the Company available for distribution or be applied in paying dividends on any shares in the Company. In periods other than a Relevant Period any amount standing to the credit of the capital reserve may be transferred to the revenue reserves of the Company or be regarded or treated as profits of the Company available for distribution or be applied in paying dividends on any shares in the Company.

(j) Transfer or Sale under section 110, Insolvency Act 1986

A special resolution sanctioning a transfer or sale to another company duly passed pursuant to section 110, Insolvency Act 1986 may in the like manner authorise the distribution of any shares or other consideration receivable by the liquidator among the members otherwise than in accordance with their existing rights and any such determination shall be binding on all the members, subject to the right of dissent and consequential rights conferred by the said section.

(k) Uncertificated Shares

The Board may make such arrangements as it sees fit, subject to the Act, to deal with the transfer, allotment and holding of shares in uncertificated form and related issues.

(l) Indemnity and Insurance

The Company shall indemnify the directors to the extent permitted by law and may take out and maintain insurance for the benefit of the directors.

5. MATERIAL CONTRACTS5.1 The following contracts, not being contracts entered into in the ordinary course of business, are

all of the contracts which have been entered into by the Company since its incorporation and which are, or may be, material, or have been entered into by the Company and contain provisions under which the Company has obligations or entitlements which are material to it at the date of this document:

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(a) An investment advisory and investment management agreement dated 12 November 2012 between the Company (1), Social Finance Limited (2), FSE Fund Managers Limited (3) and Nplus1 Singer Capital Markets Limited (4) whereby Social Finance Limited and FSE Fund Managers Limited (together the “Managers”) have agreed (subject to the overall policy and supervision of the Directors and such directions as the Directors may give from time to time) to manage or procure the management of the Company’s investments on a discretionary basis for an initial 3-year period and thereafter subject to termination on 12 months’ notice by either party or otherwise in accordance with the agreement. The appointment may also be terminated (inter alia) in circumstances of material breach by either party. For the provision of their services in accordance with the agreement, the Managers will each receive a fixed annual fee (payable quarterly in arrears) of 1% of net asset value of the Company (plus VAT, if any, at the applicable rate) subject to a minimum fee of £100,000 each per annum each during years 1 – 3 (which is the envisaged active investment phase) and thereafter subject to a minimum fee of £75,000 each per annum.

The Managers retain the right to charge arrangement, exit and syndication fees to investee companies, and will be responsible for all costs of an investment that does not proceed. The Managers may also receive ongoing directors’ fees and monitoring fees from the investee companies as appropriate.

(b) An engagement letter dated 22 October 2012 from Marechale Capital Plc (“Marechale”) to the Company, whereby Marechale has agreed to act as the Company’s promoter in relation to the Offer and any subsequent offerings. The appointment is for a minimum of 3 years but may be terminated by either party in exceptional circumstances on 3 months written notice.

In the event that the Company successfully raises new funds from investors, a fee of 1.5% of the gross funds raised (in respect of gross funds raised up to £7 million) and 2% of the gross funds raised (in respect of the portion of the gross funds raised in excess of £7 million) in each case excluding any gross funds committed by an institutional investor or raised through direct marketing by FSE and Social Finance among their network of board members and clients. The Company will reimburse any reasonable expenses incurred by Marechale in connection with the Offer. In the event that total new funds raised exceed £25 million then an additional 0.5% bonus payment will be paid to Marechale, but payment will be deferred for 12 months. The Company has given customary representations and warranties, and indemnities, to Marechale. There are no value or time limits attached to the indemnities other than the statutory limit of six years.

(c) A letter of appointment dated 31 October 2012 from the Company to The City Partnership (UK) Limited (“City”), whereby the Company agree d to appoint City as its company secretary, accountant and administrator for an initial period of one year from the first date on which the board of directors of the Company resolve to allot shares issued pursuant to the Offer and thereafter until terminated by not less than six months’ notice in writing given to expire at any time after that initial period. The agreement may be terminated by either party by notice in writing if the other party commits a material breach of the agreement and fails to rectify the same within 30 days of being requested to do so or if one party enters liquidation or has a receiver of administrator appointed over that party or any of its undertakings or assets. City shall provide the company secretarial, accounting and administration services as itemised in the schedule which accompanies the agreement. In consideration of City providing such services to the Company, the Company will pay to City an annual fee (plus value added tax where applicable), payable quarterly in advance, equal to £30,000. Such fee is to be increased annually in line with the index of retail prices and the Company will pay to City all reasonable out-of-pocket expenses.

(d) A receiving agent services agreement dated 31 October 2012 between the Company (1) and City (2) whereby City will provide receiving agent services in respect of the Company. In consideration of City providing such services to the Company, the Company will pay City the fees itemised in the Receiving Agent Services, Fees & Charges Schedule which accompanies that agreement. Such fees will be capped at £10,000 (plus value added tax where applicable) in aggregate plus any out of pocket expenses. With the exception of fraud, negligence or wilful default by City, the Company indemnifies City against all actions, proceedings, costs, claims, demands and liabilities which may be incurred or suffered by City to the extent that they relate to the provision of the services as set


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out in the schedule accompanying the agreement. The agreement may be terminated by either party giving notice in writing to the other if the other party commits a material breach of the agreement and fails to rectify the same within 30 days of being requested to do so or if the other party enters into liquidation or has a receiver or administrator appointed over that party or any of its undertakings or assets.

(e) A registrar services agreement dated 31 October 2012 between the Company (1) and City (2) whereby the Company appoint ed City to be and City agree d to act as the registrar of the Company with effect from the date of the first allotment of Ordinary Shares under the Offer (the “Appointment Date”), for an initial period of twelve months and thereafter, terminable by written notice of at least six months by either party. Such notice not to expire before the expiry of the initial period of twelve months. Either party may terminate the agreement by service of written notice in the event of persistent or material breach by the other party of the agreement and failure to rectify the same within 30 days of being requested to do so or a resolution being passed for the winding up of the other party or an administrator or administrative receiver being appointed over the other party or its assets or undertaking. City may terminate the agreement at any time upon sending written notice to the Company if the Company fails to pay City any sum due under the agreement within 30 days of it being due. City shall provide a share registration service in accordance with the Companies Act 2006, the Company’s Articles of Association, the rules of the UK Listing Authority, the rules of the London Stock Exchange or any other market on which the Company’s shares may be traded. The Company shall pay City the fees as set out in the schedule to the agreement. The total sum payable shall be capped at £3,500 (plus value added tax as applicable) in respect of the first year from the Appointment Date. City will render invoices quarterly in arrears in respect of standard services and out of pocket expenses. City’s fees and out of pocket expenses are due for payment within 30 days of the invoice. With the exception of fraud, negligence or wilful default by City, the Company agrees to indemnify City against all actions, proceedings, costs, claims, demands and liabilities arising out of the services provided by City.

( f) By letters dated 12 November 2012 the Directors agreed to act as non-executive directors of the Company on the terms set out at paragraph 3(f) of this Part Four.

( g) An engagement letter dated 4 November 2011 from Singer to the Company, whereby Singer has agreed to act as sponsor to the Company in connection with the Offer. The Company has given customary representations and warranties, and an indemnity, to Singer. There are no value or time limits attached to the indemnity other than the statutory limit of six years. Either the Company or Singer may terminate the agreement at any time by giving at least 30 days’ written notice to the other party, or immediately on written notice of any material breach of the engagement letter.

6. TAXATION AND CLOSE COMPANY STATUS 6.1 The following paragraphs, which are intended as a general guide only and are based on current

legislation and HMRC practice, summarise advice received by the Directors as to the position of Shareholders who hold Ordinary Shares other than for trading purposes. Any person who is in any doubt as to his taxation position or is subject to taxation in any jurisdiction other than the UK should consult his professional advisers.

(a) Taxation of dividends – under current law, no tax will be withheld by the Company when it pays a dividend.

(b) The Company has been advised that no stamp duty reserve tax (“SDRT”) will be payable on the issue of the Ordinary Shares. The transfer on sale of any Ordinary Shares will be liable to ad valorem stamp duty normally at the rate of 0.5% of the amount or value of the consideration (rounded up to the nearest £5). An unconditional agreement to transfer Ordinary Shares also gives rise to an obligation to account for SDRT, which is payable within seven days of the start of the month following that in which the agreement was entered into. The payment of stamp duty gives rise to a right to repayment of any SDRT paid. There will be no stamp duty or SDRT on a transfer of Ordinary Shares into CREST unless such a transfer is made for a consideration in money or money’s worth, in which case a liability to SDRT will arise at

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a rate of 0.5%. A transfer of Ordinary Shares effected on a paperless basis through CREST will generally be subject to SDRT at a rate of 0.5% of the value of the consideration.

(c) On the issue of the Ordinary Shares pursuant to the Offer, the Company is unlikely to be a close company for tax purposes. If the Company was a close company in any accounting period, approval as a venture capital trust would be withdrawn.

7. OVERSEAS INVESTORS(a) 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 to subscribe for or purchase Ordinary Shares in the Company.

(b) No action has been taken to permit the distribution of this document in any jurisdiction outside the UK where such action is required to be taken.

8. RELATED PARTY DISCLOSURES8.1 There are no arrangements which the Company has entered into with a related party and no

related party transactions have taken place since incorporation of the Company to the date of this document.

9. CORPORATE GOVERNANCE AND BOARD COMMITTEE(a) The Company complies with the principles of the UK Corporate Governance Code save as set

out below:

(i) Directors are not appointed for a specified term (in view of its non-executive nature and the requirements of the Articles that all Directors retire by rotation at the annual general meeting, the Board considers that it is not appropriate for the Directors to be appointed for a specific term as recommended by the Code); and

(ii) in light of the responsibilities retained by the Board and its committees and of the responsibilities delegated to the Managers, the Company has not appointed a chief executive officer, deputy chairman or a senior independent non-executive director and the provisions of the Code which relate to the division of responsibilities between a chairman and a chief executive officer are, accordingly, not applicable.

(b) The Company has an Audit Committee, which is chaired by Jonathan Roe and also comprises Mark Mansley and Jeremy Delmar-Morgan, all of whom are independent of the Managers. The Audit Committee will meet at least twice each year and is responsible for making recommendations to the Board on the appointment of the auditors and the audit fee, for reviewing the conduct and control of the annual audit and for reviewing the operation of the internal financial controls. It will also have responsibility for the proper reporting of the financial performance of the Company and for reviewing financial statements prior to publication. As the Company has no employees, no Remuneration Committee will be formed. The Company does not intend to appoint a senior independent Director or to form a Nominations Committee due to the Board being relatively small in size.

(c) The Board must be able to demonstrate that it will act independently of the Managers. In particular, a majority of the Board (including the Chairman) must not be:

(i) directors, employees, partners, officers or professional advisers of or to the Managers or any other company in the same group as the Managers; or

(ii) directors, employees or professional advisers of or to any other VCT managed by the Managers or any other company in the same group as the Managers.

Any Director who falls within (i) or (ii) above is subject to annual re-election by Shareholders.

10. INVESTMENT RESTRICTIONS(a) The Company is subject to the investment restrictions relating to a venture capital trust in ITA, as

more particularly detailed in Part Three of this document, and in the Listing Rules which specify that (i) the Company must, at all times, invest and manage its assets in a way which is consistent


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with its object of spreading investment risk and in accordance with its published investment policy as set out in Part One of this document; (ii) the Company must not conduct any trading activity which is significant in the context of its group as a whole; and (iii) the Company may not invest more than 10% in aggregate, of the value of the total assets of the issuer at the time an investment is made in other listed closed-ended investment funds. Any material change to the investment policy of the Company will require the approval of the Shareholders pursuant to the Listing Rules. The Company intends to direct its affairs in respect of each of its accounting periods so as to qualify as a venture capital trust and accordingly:

(i) The Company’s income is intended to be derived wholly or mainly from shares or other securities, as this phrase is interpreted by HMRC;

(ii) The Company will not control the companies in which it invests in such a way as to render them subsidiary undertakings;

(iii) none of the investments will represent more than 15% (at the time of investment) of the Company’s investments; and

(iv) not more than 20% of the Company’s gross assets will at any time be invested in the securities of property companies.

(b) In the event of a breach of the investment restrictions which apply to the Company, Shareholders will be informed by means of the interim and/or the annual report or through a public announcement.

11. INFORMATION ON THE MANAGERSFSE Fund Managers Limited is authorised and regulated by the Financial Services Authority and registered in England and Wales under company number 05644712 and was incorporated on 5 December 2005 in the UK. FSE Fund Managers Limited is domiciled in the UK and is a limited company. Its registered office and its principal place of business is at Riverside House, 4 Meadows Business Park, Station Approach, Blackwater, Surrey, GU17 9AB. The telephone number of its principal place of business is 01276 608510. The principal legislation under which it operates is CA 2006 and regulations made thereunder.

Social Finance Limited is authorised and regulated by the Financial Services Authority and registered in England and Wales under company number 06402143 and was incorporated on 17 October 2007 in the UK. Social Finance Limited is domiciled in the UK and is a limited company. Its registered office and its principal place of business is at 131 – 151 Great Titchfield Street, London, W1W 5BB. The telephone number is 0 207 667 63 86. The principal legislation under which it operates is CA 2006 and regulations made thereunder.

12. WORKING CAPITALSocial Impact VCT is of the opinion that, taking into account the Minimum Net Proceeds of the Offer being raised, it has sufficient working capital for its present requirements, that is for at least 12 months from the date of this document.

13. NET ASSETSThe Offer will have a positive impact on the net assets of the Company by increasing its net assets by the same amount as the net funds raised and is expected to have a positive impact on earnings.

14. FINANCIAL INFORMATIONSince the date of incorporation, the Company has not commenced operations and no financial statements have been made up as at 12 November 2012 (being the latest practicable date prior to the publication of this document).

15. CAPITALISATION AND INDEBTEDNESS Since the date of incorporation, and as at 12 November 2012 (being the latest practicable date prior to the publication of this document), the Company has incurred no indebtedness, whether guaranteed, unguaranteed, secured, unsecured, indirect or contingent. The Company has the power to borrow,

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details of which are set out in paragraph 4(e) of Part Four of this document, although the Directors have no present intention of utilising this.

The capitalisation of the Company as at 12 November 2012 (being the latest practicable date prior to the publication of this document) is as follows:

Shareholders’ Equity £

Share Capital 12,500.0 0

Legal reserve Nil

Other reserves Nil

Total 12,500.0 0

Details of the share capital of the Company are set out in paragraph 2 above.

16. GENERAL(a) The Offer Price is 100p per Ordinary Share.

(b) The total expenses payable by the Company in connection with the Offer (including VAT where applicable) will be a maximum of 5.5p in respect of each Ordinary Share subscribed, such that the initial net assets of the Company will be equal to 94.5p per Ordinary Share , not taking into account the effects of any Ordinary Shares issued under the early investment incentive or as a consequence of permissible initial intermediary commissions having been waived. The Offer Price represents a premium of 90p per Ordinary Share over nominal value. If the maximum subscription of £20,000,000 is achieved under the Offer, the net proceeds will amount to £18.9 million. If the Minimum Gross Proceeds of £7.5 million are obtained, the net proceeds will be £7.09 million. The proceeds will be applied in accordance with the Company’s investment policy and to redeem the Redeemable Shares.

(c) Save as disclosed in paragraph 5(b) above, no amount of cash, securities or benefits has been paid, issued or given to Marechale Capital Plc (as the promoter of the Offer) and none is intended to be paid, issued or given.

(d) The Directors believe that the Offer will result in a significant gross change in the Company, including an increase in its earnings and in the net assets (of an amount that is equal to the net proceeds received under the Offer, expected to be £18.9 million assuming full subscription).

(e) Other than the Offer there have been no other important events so far as the Company and the Directors are aware relating to the development of the Company or its business.

(f) Save for the issue of Redeemable Shares (£50,000 of share capital issued paid up to one quarter) as set in paragraph 2(b) above, which has resulted in the assets of the Company having increased by £12,500 (this being the amount paid up on the Redeemable Shares), there has been no significant change in the financial or trading position of the Company since its incorporation.

(g) There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware), during the period from the incorporation of the Company which may have, or have had in the recent past significant effects on the Company’s financial position or profitability.

(h) As at the date of this document, there are no governmental, economic, monetary, political or fiscal policies and factors which have or could affect the Company’s operations.

(i) There are no known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Company’s prospects for at least the current financial year, so far as the Company and the Directors are aware.

(j) The Company and its Shareholders are subject to the provisions of the Takeover Code and CA 2006, which require shares to be acquired/transferred in certain circumstances.


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(k) Where the circumstances are appropriate, the Directors propose that an appropriate and reasonable proportion of the management expenses of the Company, to be determined after consultation with the Company’s auditors, but not to exceed 75%, will be charged to capital.

(l) The Company’s capital resources are restricted insofar as they may be used only in putting into effect the investment policies described in Part One of this document.

(m) The City Partnership (UK) Limited is responsible for the calculation of the net asset value of the Company based on valuations provided by the Company which is then approved by the Board. The net asset value of the Company will be determined four times a year, concurrent with the announcements of the interim and annual financial statements to 30 September and 31 March respectively (such announcements being usually made in November and June respectively) and interim management statements for the quarters ended 30 June and 31 December in each year. The value of investments will be determined in accordance with the IPEVC Guidelines depending on their listing status. Quoted securities will be valued at bid price unless the investment is subject to restrictions or the holding is significant in relation to the share capital of a small quoted company, in which case a discount may be appropriate as per the IPEVC Guidelines. Unquoted investments will normally be valued on a cost basis in the first year and reviewed subsequently on the basis of the progression of the business. The net asset value of the Company will be communicated to investors through a Regulatory Information Service provider at the same frequency as the determinations. In the event of any suspension of listing valuations are held at the suspended price and a view is taken with consideration to best market practice and information from advisers.

(n) The Directors do not anticipate any circumstances arising under which the calculation of the net asset value may be suspended. Should the determination of net asset value differ from that set out above then this will be communicated to investors in the Company through a Regulatory Information Service provider.

(o) The Company does not intend to appoint an external custodian and its assets (other than the Non-Qualifying Investments) will be held in certificated form.

(p) The Company will not conduct any significant trading activity.

(q) The Company confirms that it has taken all reasonable steps to ensure that its auditors, Scott-Moncrieff , being members of the Institute of Chartered Accountants of Scotland , are independent of it and has obtained written confirmation from the auditors that they comply with the guidelines on independence issued by their national accounting and auditing bodies.

(r) Definitive share certificates for the Ordinary Shares to be allotted under the Offer will be issued in registered form and are to be dispatched to Shareholders within 15 Business Days of allotment. The Company will be applying to Euroclear for the Ordinary Shares to be admitted to CREST as a participating security. It is expected that the admission of the Ordinary Shares to CREST as a participating security will be effective from Admission.

Shareholders who are direct or sponsored members of Euroclear will then be able to dematerialise their Ordinary Shares in accordance with the rules and practices instituted by Euroclear. The Company will not issue temporary documents of title.

(s) Singer has given and not withdrawn its written consent to the issue of this document with the inclusion herein of its name in the form and context in which it is included.

(t) As at the date of this document, there are no potential conflicts of interest between any duties of any Director of, or the Managers to, the Company and their private interests and/or other duties.

(u) The information set out on pages 17 and 18 which has been sourced from a third party, has been accurately reproduced, and as far as the Company is aware, no facts have been omitted which would render the reproduced information inaccurate or misleading.

(v) The Company consents to the use of this Prospectus by financial intermediaries and accepts responsibility for the information contained in this document in respect of any final placement of New Ordinary Shares by any financial intermediary which was given consent to use this document. The offer period within which subsequent resale or final placement of securities by financial

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intermediaries can be made and for which consent to use this prospectus is given commences on 13 November 2012 and closes at 5.00 pm on 12 November 2013. Information on the terms and conditions of the Offer by any financial intermediary is to be provided at the time of the Offer by the financial intermediary. Financial intermediaries may use this Prospectus in the UK.

Any financial intermediary that uses this document must state on its website that it uses this document in accordance with the Company’s consent. Financial intermediaries are required to provide the terms and conditions of the Offer to any prospective investor who has expressed an interest in participating in the Offer to such financial intermediary. No financial intermediary will act as principal in relation to the Offer.

17. DOCUMENTS AVAILABLE FOR INSPECTIONFor the life of the Prospectus the following documents (or copies thereof) may be inspected at the registered office of the Company during normal business hours on weekdays (Saturdays, Sundays and public holidays excepted):

(a) the Memorandum and Articles of the Company;

(b) the material contracts referred to in paragraph 5 above ;

(c) the consent letter referred to at paragraph 16(s) above; and.

(d) this document.

Dated: 13 November 2012


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DefinitionsThe following definitions are used throughout this document, unless the context requires otherwise:

“Administrator” or “City” The City Partnership (UK) Limited;

“Admission” admission of the Ordinary Shares to the Official List of the UK Listing Authority and to trading on the London Stock Exchange’s listed securities market;

“AIM” a market operated by the London Stock Exchange;

“Annualised Return” or “IRR” Internal rate of return, that is the annualised effective compounded return rate, at which the net present value of costs of the investment equals the net present value of future expected cash flows from the investment. These returns exclude any tax benefits an investor may receive when subscribing for Ordinary Shares in Social Impact VCT;

“Application Form” the application form accompanying the Prospectus for use in respect of the Offer;

“Articles” the articles of association of the Company, as amended from time to time;

“Board” the board of directors of the Company;

“Business Days” a day on which clearing banks and foreign exchange markets settle payment and are open for general business in London;

“CA 2006 ” the Companies Act 2006;

“City ” The City Partnership (UK) Limited ;

“close company” a company which is a close company within the meaning of section 439 of the Corporation Tax Act 2010;

“the Company” or “Social Impact VCT” Social Impact VCT plc;

“Directors” the directors of the Company whose names appear under “The Board” on page s 24 to 25 of this document (and each a “Director”);

“Disclosure and Transparency Rules” the Disclosure and Transparency Rules published by the Financial Services Authority from time to time;

“Euroclear” Euroclear UK & Ireland Limited;

“FSA” the Financial Services Authority;

“FSE” or “The FSE Group” FSE C.I.C., a community interest company, registered in England and Wales with company number 4463599 together with its subsidiary undertakings;

“FSE FM” or “Investment Manager” FSE Fund Managers Limited, a FSA-regulated private limited company (wholly owned by FSE), registered in England and Wales with company number 5644712 (FSA registration number 458820);

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“HMRC” HM Revenue & Customs;

“Investment Adviser” Social Finance Limited, a private company, registered in England and Wales with Company Number 06402143;

“Investment Committee” the committee described on pages 34 to 35 of this document;

“Investment Manager” “FSE FM”;

“IPEVC Guidelines” the International Private Equity and Venture Capital Valuation Guidelines;

“ITA” Income Tax Act 2007 (as amended);

“Listing Rules” the Listing Rules of the UK Listing Authority;

“London Stock Exchange London Stock Exchange plc;

“Management Fees” has the meaning set out at page 36 ;

“Managers” together “FSE FM” and “Social Finance”

“Memorandum” the memorandum of association of the Company;

“Minimum Gross Proceeds” the minimum gross proceeds of the Offer, being £7.5 million;

“Minimum Net Proceeds” the minimum net proceeds of the Offer, being £7.09 million;

“net asset value” the gross assets of the Company less its gross liabilities;

“Non-Qualifying Investment” an investment and/or asset which is not a Qualifying Investment;

“Offer” the Offer for subscription of up to 20,000,000 Ordinary Shares described in this document;

“Offer Price” 100p per Ordinary Share;

“Official List” the Official List of the UK Listing Authority;

“Ordinary Shares” ordinary shares of 10p each in the capital of the Company (and each an “Ordinary Share”);

“Prime Contractor” a prime contractor in the Work Programme who has full responsibility for the completion of the contract with Department for Work and Pensions, and who may employ (and manage) one or more subcontractors to carry out specific parts of the contract;

“Prospectus” this document;

“Prospectus Rules” the Prospectus Rules of the UK Listing Authority;

“Qualifying Company” a company satisfying the conditions of Chapter 4 of Part 6 ITA as described in Part Three of this document;

“Qualifying Investment” an investment in, inter alia, an AIM listed or unquoted company which satisfies the requirements of Chapter 4 of Part 6 ITA, as described in Part Three of this document;

“RDR Rules” rules made by the FSA pursuant to the Retail Distribution Review and which come into effect on 31 December 2012;


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“Receiving Agent” The City Partnership (UK) Limited , in its capacity as receiving agent to the Offer;

“Redeemable Shares” redeemable shares of £1 each in the capital of the Company;

“Registrar” The City Partnership (UK) Limited , in its capacity as registrar to the Company;

“Shareholders” holders of Ordinary Shares (and each a “Shareholder”);

“Social Finance” Social Finance Limited, a private limited company, registered in England and Wales with company number 06402143 (FSA registration number 497568);

“Social Impact Report” the annual social impact report on each of the VCT investee companies to be provided to Shareholders containing outcome metrics measured, as well as qualitative case studies to illustrate how the investee company is generating a social impact;

“Sponsor” or “Singer” Nplus1 Singer Capital Markets Limited (FSA registration number 453676);

“subsidiary” a subsidiary as defined by section 1159 of the Companies Act 2006;

“subsidiary undertaking” a subsidiary undertaking as defined by section 1162 of the Companies Act 2006;

“UK” the United Kingdom of Great Britain and Northern Ireland;

“UK Listing Authority” the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000;

“Venture Capital Trust” or “VCT” a company approved as a venture capital trust under section 274 ITA by the Commissioners of HMRC;

“VCT Value” the value of an investment calculated in accordance with section 279 of ITA 2007; and

“Work Programme” t he Work Programme provides tailored support for claimants who need more help to undertake active and effective job seeking. Participants receive support to overcome barriers that prevent them from finding and staying in work. It is delivered by service providers (contracted by the Department for Work and Pensions) who have been given complete autonomy to decide how best to support participants while meeting their minimum service delivery standards.

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Part Five: Terms and Conditions of the Offer 1. The contract created by the acceptance of applications in the manner herein set out will be

conditional on the admission of the Ordinary Shares of the Company being issued to the Official List of the UK Listing Authority and to trading on the London Stock Exchange’s main market for listed securities unless otherwise so resolved by the Board of the Company. If any application is not accepted, or if any contract created by acceptance does not become unconditional, or if any application is accepted for fewer Ordinary Shares than the number applied for, or if there is a surplus of funds in excess of £1 from the application amount, the application monies or the balance of the amount paid on application will be returned without interest by post at the risk of the applicant. In the meantime, application monies will be retained by the Company on the applicant’s behalf. The Offer is conditional on valid applications being received amounting to, in aggregate, Minimum Gross Proceeds of £7.5 million. The Company reserves the right (subject to agreement with the Managers) to lower the Minimum Gross Proceeds to no less than £6 million. Such a decision would be made public through publication of a supplementary prospectus. In the event of the Minimum Gross Proceeds not being reached by 5 April 2013, the applicant can have his/her application for the 2012/2013 tax year rolled over to the 2013/2014 tax year by providing consent in the Application Form. In the event of the Minimum Gross Proceeds not being reached by 12 November 2013, the Offer will lapse and applications monies which have been received will be returned without interest. The Board reserves the right to close the Offer at a date earlier than 12 November 2013.

2. The Company reserves the right to present all cheques and banker’s drafts for payment on receipt and to retain documents of title and surplus application monies pending clearance of the successful applicants’ cheques and banker’s drafts.

3. By completing and delivering an Application Form, you (as the applicant):

(a) irrevocably offer to subscribe, in respect of the amount of money specified in your Application Form, for Ordinary Shares at 100p per share, subject to the provisions of (i) the Prospectus (including any supplementary prospectus issued by the Company and filed with the FSA), (ii) these terms and conditions and (iii) the Memorandum and Articles;

(b) authorise the Company’s registrar to send definitive documents of title for the number of Ordinary Shares for which your application is accepted and to procure that your name is placed on the register of members of the Company in respect of such Ordinary Shares and authorise the Company to send you a crossed cheque for any monies returnable, by post to your address as set out in your Application Form;

(c) in consideration of the Company agreeing that it will not, prior to the closing date of the Offer, offer any Ordinary Shares to any persons other than by means of the procedures set out or referred to in this document, agree that your application may not be revoked until the closing date of the Offer, and that this paragraph constitutes a collateral contract between you and the Company which will become binding upon dispatch by post or delivery by hand (during normal business hours only) of your Application Form duly completed to the Receiving Agent;

(d) agree and warrant that your cheque or banker’s draft will be presented for payment on receipt and will be honoured on first presentation and agree that, if such remittance is not so honoured, you will not be entitled to receive certificates for the Ordinary Shares applied for or to enjoy or receive any rights or distributions in respect of such Ordinary Shares unless and until you make payment in cleared funds for such Ordinary Shares and such payment is accepted by the Company (which acceptance shall be in its absolute discretion and may be on the basis that you indemnify it 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 that at any time prior to unconditional acceptance by the Company of such late payment in respect of such Ordinary Shares, the Company may (without prejudice to its other rights) treat the agreement to allot such Ordinary Shares as void and may allot such Ordinary Shares to some other person in which case you will not be entitled to any refund or payment in respect of such Ordinary Shares (other than return of such late payment);


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(e) agree that any documents of title and any monies returnable to you may be retained pending clearance of your remittance, that such monies will not bear interest and any monies not used to purchase Ordinary Shares of an amount less than £1 will not be returnable and will be retained by the Company for use by the Company for any purpose;

(f) agree that all applications, acceptances of applications and contracts resulting there from will 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 to bring any action, suit or proceeding arising out of or in connection with any such applications, acceptances of applications and contracts in any other manner permitted by law or in any court of competent jurisdiction;

(g) agree that, in respect of those Ordinary Shares for which your application has been received and processed and not refused, acceptance of your application shall be constituted by the Company instructing the Receiving Agent to enter your name on the share register;

(h) agree that all documents in connection with the Offer and any returned monies will be sent at your risk and may be sent by post to you at your address as set out in the Application Form;

(i) agree that, having had the opportunity to read the Prospectus and any supplementary prospectus issued by the Company and filed with the FSA, you shall be deemed to have had notice of all information and representations concerning the Company contained herein and any supplementary prospectus issued by the Company and filed with the FSA (whether or not so read);

(j) confirm that in making such application you are not relying on any information or representation in relation to the Company other than those contained in this Prospectus (including any supplementary prospectus issued by the Company and filed with the FSA) and you accordingly agree that no person responsible solely or jointly for this Prospectus (including any supplementary prospectus issued by the Company and filed with the FSA) or involved in the preparation thereof shall have any liability for any such information or representation;

(k) confirm that you have reviewed the restrictions contained in paragraphs 4 and 5 below and warrant as provided therein;

(l) warrant that you are not under the age of 18 years;

(m) agree that such Application Form is addressed to the Company and the Receiving Agent;

(n) agree to provide the Company and/or Receiving Agent with any information which it may request in connection with your application and/or in order to comply with the venture capital trust or other relevant legislation and/or the Money Laundering Regulations 2007 (as the same may be amended from time to time);

(o) warrant that, in connection with your application, you have observed the laws of all relevant territories, obtained any requisite governmental or other consents, complied with all requisite formalities and paid any issue, transfer or other taxes due in connection with your application in any territory and that you have not taken any action which will or may result in the Company or the Receiving Agent acting in breach of the regulatory or legal requirements of any territory in connection with the Offer or your application;

(p) agree that the Receiving Agent will not regard you as its customer by virtue of your having made an application for Ordinary Shares or by virtue of such application being accepted; and

(q) declare that a loan has not been made to you or any associate, which would not have been made or not have been made on the same terms, but for you offering to subscribe for, or acquiring Ordinary Shares and that the Ordinary Shares are being acquired for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

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4. No action has been or will be taken in any jurisdiction by, or on behalf of, the Company which would permit a public offer of Ordinary Shares in any jurisdiction where action for that purpose is required, other than the UK, nor has any such action been taken with respect to the possession or distribution of this document other than in the UK. No person receiving a copy of this Prospectus (including any supplementary prospectus issued by the Company and filed with the FSA) or an Application Form in any territory other than the UK may treat the same as constituting an invitation or offer to him nor should he in any event use such Application Form unless, in the relevant territory, such an invitation or offer could lawfully be made to him or such Application Form could lawfully be used without contravention of any registration or other legal requirements. It is the responsibility of any person outside the UK wishing to make an application for Ordinary Shares to satisfy himself as to full observance of the laws of any relevant territory in connection therewith, including obtaining any requisite governmental or other consents, observing any other formalities required to be observed in such territory and paying any issue, transfer or other taxes required to be paid in such territory. The Ordinary Shares have not been nor will be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States of America, its territories or possessions or other areas subject to its jurisdictions (the “US”). In addition, the Company has not been and will not be registered under the United States Investment Advisers Act of 1940, as amended. No Application Form will be accepted if it bears an address or post mark in the US.

5. The basis of allocation will be determined by the Company (after consultation with the Receiving Agent) in its absolute discretion. It is intended that applications will be accepted in the order in which they are received. The Offer opens on 13 November 2012 and will be open until 5.00 pm on 5 April 2013 in the case of applications for the 2012/2013 tax year. For the 2013/2014 tax year the Offer will open on 6 April 2013 and close at 5.00 pm on 12 November 2013, unless fully subscribed earlier. The Directors in their absolute discretion may also decide to increase the Offer (such increase to be completed, and subject to, the issue of a supplementary prospectus). The right is reserved, notwithstanding the basis so determined, to reject in whole or in part and/or scale down any application, in particular multiple and suspected multiple applications which may otherwise be accepted. Application monies not accepted or if the Offer is withdrawn will be returned to the applicant in full by means of a cheque, posted at the applicant’s risk. The right is also reserved to treat as valid any application not complying fully with these Terms and Conditions of Application or not in all respects complying with the Application Procedures set out at the end of this document. The Offer is not underwritten.

6. Save where the context requires otherwise, terms defined in this Prospectus bear the same meaning when used in these Terms and Conditions of Application and in the Application Form.

7. Authorised financial intermediaries who, acting on behalf of their clients, return valid Application Forms bearing their stamp or full address details and FSA number will be entitled to receive an initial commission of 3.0%, save to the extent that such commission payments are prohibited by the Retail Distribution Review taking effect on 31 December 201 2.

8. Applicants whose Application Form is received by 5.30 pm on 21 December 2012 will be entitled to 10 additional Ordinary Shares for every £1,000 subscribed.


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LODGING OF APPLICATION FORMS AND DEALING ARRANGEMENTSCompleted Application Forms with the appropriate remittance must be posted or delivered by hand (during normal business hours only) to The City Partnership (UK) Limited, 21-23 Thistle Street, Edinburgh, EH2 1DF . The Offer opens on 13 November 2012 and will be open until 5.00 pm on 5 April 2013 in the case of applications for the 2012/2013 tax year. For the 2013/2014 tax year the Offer will open on 6 April 2013 and close at 5.00 pm on 12 November 2013, unless fully subscribed earlier. The Directors in their absolute discretion may also decide to increase the Offer. If you post your Application Form, you are recommended to use first class post and to allow at least two Business Days for delivery.

Please note that the deadline for applications for the 2012/2013 tax year is 5 .00 pm on 5 April 2013.

It is expected that dealings in the Ordinary Shares will commence within 3 Business Days following allotment and that share certificates will be dispatched within 10 Business Days of allotment of the Ordinary Shares. Allotments will be announced to an appropriate Regulatory Information Service.

Temporary documents of title will not be issued. Dealings prior to receipt of share certificates will be at the risk of applicants. A person so dealing must recognise the risk that an application may not have been accepted to the extent anticipated or at all. To the extent that any application is not accepted any payment will be returned without interest by returning the applicant’s cheque or banker’s draft or by sending a crossed cheque in favour of the applicant through the post, at the risk of the person entitled thereto.

MONEY LAUNDERING NOTICE – IMPORTANT PROCEDURES FOR APPLICATIONS OF €1 5,00 0 OR MORE IN AGGREGATE.In such circumstances, The City Partnership (UK) Limited will require verification of the identity of the applicant. Failure to provide the necessary evidence of identity may result in your application being treated as invalid or in a delay of confirmation.

If the application is for €1 5,00 0 or more :

(A) Verification of the investor’s identity may be provided by means of a “Letter of Introduction”’, from an intermediary or other regulated person (such as a solicitor or accountant) who is a member of a regulatory authority and is required to comply with the Money Laundering Regulations 2007 or a UK or EC financial institution (such as a bank). The City Partnership (UK) Limited will supply specimen wording on request; or

(B) If an application is made direct (not through an intermediary), you must provide the following documents:

(1) either a certified copy of your passport or driving licence; and

(2) a recent (no more than 3 months old) original bank or building society statement, utility bill or recent tax bill in your name.

Copies should be certified by a solicitor or bank. Original documents will be returned by post at your risk.

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APPLICATION PROCEDURE

Social Impact VCT plcSECTION 1Please insert your full name, permanent address, daytime telephone number, date of birth, email address and national insurance number in Section 1. Your national insurance number is required to ensure you obtain your income tax relief. Joint applications are not permitted but spouses and civil partners may apply separately.

SECTION 2Please indicate how you would like us to communicate with you.

SECTION 3Please note that the minimum investment is £2,000, and thereafter in multiples of £1,000. The maximum investment into VCTs in any tax year, on which tax reliefs are available, is £200,000. Attach your cheque or banker’s draft to the Application Form for the total amount of your investment.

Please make cheques payable to ‘ Social Impact VCT plc’ and crossed ‘A/C Payee only’. Cheques must be from a recognised UK Bank account and from an account where the applicant has sole or joint title to the funds, and your payment must relate solely to this application.

Read the declaration below and sign and date the Application Form.

If this form is completed and signed by the investor named in Section 1:

By signing this form I HEREBY DECLARE THAT:

i. I have received the Prospectus dated 13 November 2012 and have read the Terms and Conditions of Application therein and agree to be bound by them;

ii. I will be the beneficial owner of the Ordinary Shares of Social Impact VCT plc issued to me under this Offer;

iii. I understand the risk factors associated with an investment in Social Impact VCT plc; and

iv. to the best of my knowledge and belief, the personal details I have given are correct.

If this form is completed and signed by an authorised financial intermediary or any other person apart from the investor, by signing this form on behalf of the individual whose details are shown above, I make a declaration (on behalf of such individual) on the terms of sub-paragraphs i. to iv.

SECTION 4If the application is from an authorised financial intermediary, please include full name and address, telephone number and details of your firm’s authorisation under the Financial Services and Markets Act 2000. The right is reserved to withhold payment of commission if Social Impact VCT plc and The City Partnership (UK) Limited are not, in their discretion, satisfied that the financial intermediary is authorised or if the payment is prohibited by the Retail Distribution Review.

SECTION 5If you wish your shares to be held in CREST immediately on allotment, please provide the further details requested in this section. Please sign, enter your name in block capitals and date your instruction where indicated.

SECTION 6Please complete the mandate instruction if you wish to have dividends paid directly into your bank or building society.


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FREQUENTLY ASKED QUESTIONSQ: To w hom should I make the cheque payable ?

A: Cheques should be made payable to ‘ Social Impact VCT plc’.

Q: If I am paying by telegraphic transfer what account and references should I use?

A: The account details which should be used to transfer monies are:

Bank: HSBC Bank plc Account name: Social Impact VCT plc Account Number: 11825976 Sort Code: 40-05-20

Please use the investor’s surname as the reference.

Q: Where should I send my Application Form?

A: Your Application Form (and cheque) should be posted or delivered by hand (during normal working hours only) to:

The City Partnership (UK) Limited21-23 Thistle StreetEdinburghEH2 1DF

Q: What happens after I invest?

A: You should expect to receive your share certificate and tax certificate within 10 working days of the Ordinary Shares being allotted to you.

Please send the completed Application Form together with your cheque or bankers’ draft to City Partnership (UK) Limited, 21-23 Thistle Street, Edinburgh, EH2 1DF . If you have any questions on how to complete the Application Form please contact The City Partnership (UK) Limited on 0131 243 7210 .

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APPLICATION FORM

Social Impact VCT plcBefore completing this Application Form you should read the Prospectus dated 13 November 2012.

The Offer opens on 13 November 2012 and will be open until 5.00 pm on 5 April 2013 in the case of applications for the 2012/2013 tax year. For the 2013/2014 tax year the Offer will open until 5.00 pm on 12 November 2013, unless fully subscribed earlier. The Board reserves the right to close the Offer at a date earlier than 12 November 2013. Under the RDR rules, the date when a personal recommendation is given by a financial intermediary will determine whether commission may be paid by the VCT to the financial intermediary. Any application in respect of a personal recommendation provided after 30 December 2012 will have the RDR rules applied concerning initial commission .

1. YOUR PERSONAL DETAILS

Title: First Name: Surname:

Address:

City: Postcode:

E-mail: Telephone (Day):

National Insurance Number : Date of Birth:

2. INVESTOR SERVICES

How would you like to be updated about your investment?

Email OR Post

✂


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3. SUBSCRIPTION DETAILSI offer to subscribe the following amount for Ordinary Shares under the Terms and Conditions of the Application as set out in the Prospectus dated 13 November 2012. The application must be for a minimum of £2,000, and thereafter in multiples of £1,000. Please tick the boxes as appropriate:

I enclose a cheque or bankers’ draft drawn on a UK clearing bank made payable to ‘ Social Impact VCT plc ’

OR

I have instructed my bank to make an electronic payment to:

Bank: HSBC Bank plc

Account Name: Social Impact VCT plc

Account Number: 11825976

Sort Code: 40-05-20

2012/13 Tax Year , number of shares applied for (ignoring any early investment incentive or waived commission (if applicable)) and amount invested at 100p per share

2013/14 Tax Year, number of shares applied for and amount invested at 100p per share

By ticking this box, I consent to my application for the 2012/2013 tax year being rolled-over to the 2013/2014 tax year in the event that the Minimum Gross Proceeds are not reached by 5 April 2013. Social Impact VCT plc will aim to contact me by no later than 26 March 2012 in the event that the Minimum Gross Proceeds had not been achieved by that date. By not ticking this box I agree that my application cannot be treated as an application for the 2013/2014 tax year should the Minimum Gross Proceeds not be reached by 5 April 2013 and request that in such event the subscription monies paid by me be returned to me.

I offer to subscribe for the above amount in the Company on the terms and conditions as set out in the Prospectus dated 13 November 2012 and the Memorandum and Articles of Association of the Company.

Signature Date

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4. ADVISER DETAILS (FOR COMPLETION BY AUTHORISED FINANCIAL INTERMEDIARIES ONLY)

Financial Adviser:

Firm Name:

Address:

City: Postcode:

Telephone Number: E-mail:

FSA Number:

Under the RDR rules, the date when a personal recommendation is given by a financial intermediary will determine whether commission may be paid by the VCT to the financial intermediary. Please tick one of the following statements below to record whether or not you have given a personal recommendation to your client and whether you are applying for the commission option.

If you have provided a personal recommendation to your client and if you would like to apply for the 3.0% commission option, place a tick in this box.

By ticking this box, you warrant that the personal recommendation was given to your client with respect to the Social Impact VCT on or prior to 30 December 2012.

OR

If you have provided a personal recommendation to your client and if you would like to waive all or part of your commission of 3.0% on the subscription, in return for an entitlement to additional Ordinary Shares for your client, place a tick in this box.

By ticking this box, you warrant that the personal recommendation was given to your client with respect to the Social Impact VCT on or prior to 30 December 2012.

Insert ‘ALL’ or the percentage of the subscription (e.g. 1.0%, 1.5% etc.) in respect of the commission of 3.0% to be waived in return for an entitlement to Ordinary Shares for your client.*

OR

If you have only acted for your client on an execution only basis and if you would like to apply for the 3.0% commission option, place a tick in this box.

By ticking this box, you warrant that you have not provided a personal recommendation to your client with respect to the Social Impact VCT. If you would like to waive all or part of your commission of 3.0% on the subscription, insert ‘ALL’ or the percentage of the subscription (e.g. 1.0%, 1.5% etc.) in respect of the commission of 3.0% to be waived in return for an entitlement to Ordinary Shares for your client.

Signature: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Firm: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Firm FSA Registration Number: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Date: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

*The sections above which relate to payment of commission in respect of personal recommendations are only applicable if you are signing this form on or prior to 30 December 2012.


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5. CRESTIf you wish your shares to be held in a CREST account, please complete the boxes below.

CREST Participant ID:

CREST Member Account ID:

Participant Name:

Participant Address:

Participant Postcode:

Contact name for CREST queries: Contact Telephone:

Reference (Optional):

Investor Signature: Date:

Print Investor name:

6. IF YOU WISH DIVIDENDS TO BE PAID TO YOU BY BANK TRANSFER, PLEASE PROVIDE THE FOLLOWING DETAILS OF THE BANK ACCOUNT TO WHICH PAYMENT SHOULD BE MADE:

Bank Name:

Bank Branch Address:

Account Holder Postcode:

Account Holder Name:

Sort Code: Account Number:

Your completed Application Form and cheque or banker’s draft should be sent to:

The City Partnership (UK) Limited, Thistle House, 21 Thistle Street, Edinburgh EH2 1DF.

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DIRECTORS, MANAGERS AND ADVISERS

Directors

John Gregory (Chairman)Jeremy Delmar-MorganMark MansleyJonathan Roe

Social Impact VCT plc55 Colmore RowBirminghamB3 2AS

Registered Office

55 Colmore RowBirminghamB3 2AS

Sponsor

Nplus1 Singer Capital Markets Limited 1 Bartholomew Lane London EC2N 2AXTel: 0207 496 3000

Auditors

Scott-Moncrieff Exchange Place3 Semple StreetEdinburghEH3 8BLTel: 0131 473 3500

Solicitors and VCT Launch Advisers

Wragge & Co LLP55 Colmore RowBirminghamB3 2ASTel: 0870 903 1000

VCT Status Adviser

PricewaterhouseCoopers LLP1 Embankment PlaceLondonWC2N 6RHTel: 0207 583 5000

Registrar

The City Partnership (UK) Limited21-23 Thistle StreetEdinburghEH2 1DFTel: 0131 243 7210

Managers

FSE Fund Managers LimitedRiverside HouseMeadows Business ParkStation Approach BlackwaterCamberleyGU 17 9ABTel: 01276 608510

Social Finance Limited131-151 Great Titchfield StreetLondonW1W 5BBTel: 020 7 667 6386

Promoter

Marechale Capital Plc3rd FloorNew Broad Street House 35 New Broad StreetLondonEC2M 1NHTel: 0207 628 5582

Receiving Agent

The City Partnership (UK) Limited21-23 Thistle StreetEdinburghEH2 1DHTel: 0131 243 7210

Administrator, Secretary and Fund Accountant

The City Partnership (UK) Limited21-23 Thistle StreetEdinburghEH2 1DFTel: 0131 243 7210


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RF65316 Printed by Royle Financial Print

Material used for the cover is Think 4 Bright.The inks used are vegetable based and the document is printed by a carbon neutral printing company.

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