To: Mr Phillip Rhoden Esq Clubfinance Ltd P.O. Box 1036 Hemel ...

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PART FOUR: MANAGEMENT AND ADMINISTRATION ARRANGEMENTS MANAGEMENT FEES Annual Management Fees The Manager has been appointed under the terms of the Investment Management Agreement, further details of which are set out in Part Six of this document. The Investment Management Agreement is for an initial period of five years from Admission and may be terminated by either party on 12 months’ notice expiring at the end of the initial term or at any time thereafter. Under the Investment Management Agreement, the Manager will receive: n n an annual management fee equal to 2.5 per cent. of the net assets of the Company (exclusive of VAT and calculated and payable quarterly in advance); and a performance related incentive fee which is outlined in more detail below. Assuming full subscription, normal annual running costs are estimated to be no more than 3.3 per cent. of net assets. Normal annual running costs of the Company include the annual management fees, administration fees (company secretarial, bookkeeping and accounting), Directors’ fees, audit fees, fees for taxation advice, sponsor’s and registrar’s fees and the costs of communicating with Shareholders but exclude annual trail commissions, performance fees, exceptional items and irrecoverable VAT. Such normal annual running costs will be capped at 3.6 per cent. of net assets (i.e. excluding annual trail commissions, performance fees, exceptional items and irrecoverable VAT) and any excess will be met by the Manager through a reduction to its management fees (calculated at the end of each financial year based on the net assets at the start of the relevant financial year). The Manager (as well as Committed Capital, if applicable) retains the right to charge arrangement and syndication fees to the companies in which the Company invests. Such charges will be in line with industry practice. The costs of all deals that do not proceed to completion will be borne by the Manager and not by the Company. The Manager (as well as Committed Capital, if applicable) may also receive ongoing directors’ fees and monitoring fees from the investee companies as appropriate and in line with market practice. Committed Capital may also retain corporate finance fees if instructed by the investee companies to provide such advice, subject to disclosure to the Board. Performance Related Incentive Fee In line with normal VCT practice, the Manager will be entitled to receive a performance related incentive fee in order to align the interests of the Manager as closely as possible with those of the investors and to encourage and reward exceptional investment performance. The performance related incentive fee structure is designed to encourage payments to investors by means of taxfree dividends, whilst at the same time achieving capital growth. The Manager will be entitled to a performance related incentive fee in each financial period, subject to the following being met: n n the Company having paid cumulative dividends to Shareholders of at least 40p per Share since Admission (excluding dividends paid from capital or the reserves created from the cancellation of capital or share premium); and the Total Return per Share (this being the aggregate of NAV per Share for the relevant financial period and total distributions declared per Share since Admission (adjusted for any provisions or accruals for performance incentive fees for the relevant period and any previous period)) being greater than the higher of 130p and the Total Return per Share at the end of any previous financial period. The figure of 130p will be increased at the end of the seventh financial period of the Company by reference to any increase in the Retail Prices Index (or equivalent if replaced) during that financial period and shall thereafter be increased at the end of each succeeding financial period by reference to any increase in the Retail Prices Index during the financial period in question. If the above is met, the Manager will be entitled to receive an amount equivalent to 20 per cent. of the amount by which the Total Return per Share exceeds 100p (this being the initial issue price of the Offer Shares) multiplied by the number of Shares then in issue. The performance related incentive fees will be paid in cash to the Manager and will be inclusive of VAT, if applicable. Other Fees The funds raised pursuant to the Offer will initially be invested in a range of cash, liquidity funds and fixed interest securities of A rating or better by Goldman Sachs International a professional investment manager for an annual fee of an amount equivalent to 0.75 per cent. of the assets under management (plus transaction fees and any VAT, if applicable). The Board will review this arrangement periodically. Maven Capital Partners UK LLP will provide certain administration, accounting, company secretarial and VCT status monitoring services to the Company, for an annual fee of £50,000. The fee is subject to VAT and will increase annually in line with the Retail Price Index. 19
VCT STATUS MONITORING The Board is responsible for ensuring continuing VCT compliance. Maven Capital Partners UK LLP will review the investment portfolio and will provide information to the Board. The Manager will generally seek confirmation from HM Revenue & Customs of each prospective investment’s VCT qualifying status prior to making each investment. SHAREHOLDER RETURNS In order to maximise the tax-free return to investors, the Manager intends to focus on investing in companies which have the potential of providing an attractive interest or dividend yield and where an exit in three to five years through a trade sale or flotation is reasonably foreseeable. Furthermore, the Manager will invest using a blend of instruments to provide yield and to capitalise on growth. The Board intends to maximise dividends by distributing at least 85 per cent. of any net income and all profits made on the disposal of investments to Shareholders. The payment of dividends will be subject to having sufficient distributable reserves, the extent to which funds need to be retained for ongoing expenses and further investments and other legal and regulatory restrictions. The Manager is incentivised to maximise annual dividend payments through the performance incentive arrangements (details of which are set out on page 43 of this document), as it is entitled to receive a performance related fee if dividends paid to Shareholders exceed certain specified thresholds and other targets are met. The payment of dividends, however, are expected to follow a progressively stepped path as the Company becomes more fully invested and exits achieved. It is the Board’s intention, therefore, to maximise dividend payments and will be targeting an aggregate of 30p of dividends being paid per Share by the end of year five (giving an average of 6p per Share per year). The ability to meet this objective depends significantly on the level and timing of profitable realisations and cannot be guaranteed. LIQUIDITY AND ENHANCED BUYBACK OPTION The Board intends to provide all Shareholders who wish to sell their Shares with an opportunity to do so, by operating a buy-back policy, whilst keeping the discount to NAV in the secondary market as narrow as reasonably possible. The Board will ensure frequent and clear information on fund performance is provided and have appointed Matrix Corporate Capital LLP as broker to make a market in the Shares in due course. The price at which Shares will be bought back will be set by the Board and reviewed from time to time, though the intention is to repurchase Shares at a discount to NAV. Share buy-backs will be subject to the Company having available reserves, Shareholder authorisations and applicable regulations and legislation from time to time. In addition, the Board, subject to market conditions at the time, intends to undertake fund top-ups which can be used to facilitate buy-backs, defray management expenses or provide funds for further portfolio investments. After the fifth anniversary of the first allotment of the Offer Shares, it is the intention of the Directors to provide Shareholders with an enhanced buy-back facility whereby Shareholders can have their existing Shares bought back by the Company with the proceeds used to subscribe for new Shares under a new offer. An enhanced buy-back facility will, however, only be implemented where to do so is considered by the Directors to be in the best interests of the Company and Shareholders at the requisite time and subject to the performance of the Company and market conditions. An enhanced buy-back facility will also be subject to requisite Shareholder authorities, HMRC approval (if required) and any statutory and regulatory provisions then in force. LIFE OF THE COMPANY It is intended that the Company should have an unlimited life, but also that Shareholders should have the opportunity to review the future of the Company at appropriate intervals. The Articles of the Company contain provisions requiring the Board to put a proposal to Shareholders for the continuation of the Company following the tenth annual general meeting, however, the Board will take into consideration the continuation of the Company periodically. VALUATION POLICY Investments will be valued in accordance with IPEVC Guidelines, pursuant to which unquoted investments will be valued at fair value. CREST The Offer Shares will be in registered form and will be eligible for electronic settlement. The Company has applied for its Shares to be admitted to the CREST system so that, should they wish to, investors will be able to hold their Shares in uncertificated form. INVESTOR COMMUNICATIONS In addition to the announcement and publication of the annual report and accounts and the interim results for the Company as detailed below, the Company also intends to publish quarterly statements of net asset value. 20
Page 1 and 2: To: Mr Phillip Rhoden Esq Clubfinan
Page 4 and 5: This document, comprising a prospec
Page 6 and 7: SUMMARY This summary conveys the es
Page 8 and 9: n n Although the Shares will be adm
Page 10 and 11: n n n n particular, markets for sma
Page 12 and 13: LETTER FROM THE CHAIRMAN Directors:
Page 14 and 15: of UK capital gains tax. Further de
Page 16 and 17: Track Record The Committed Capital
Page 18 and 19: Stock Exchange’s Alternative Inve
Page 20 and 21: standing to the credit of the reser
Page 24 and 25: Reporting Date Year end Announcemen
Page 26 and 27: (ii) Loss of provisional approval I
Page 28 and 29: PART SIX: ADDITIONAL INFORMATION 1.
Page 30 and 31: (e) (f) (g) (h) commission, discoun
Page 32 and 33: (k) The Directors are currently or
Page 34 and 35: (ii) (2) On a return of assets (exc
Page 36 and 37: (v) (vi) such quorum is present or
Page 38 and 39: (e) on the register at the date at
Page 40 and 41: lender and a Group company as hirer
Page 42 and 43: (ii) (iii) if his vote had not been
Page 44 and 45: (i) (ii) such share from the member
Page 46 and 47: (c) (d) conflicts of interest, whic
Page 48 and 49: 10. Investment Restrictions (a) The
Page 50 and 51: (o) (p) (q) (r) (s) (t) calculation
Page 52 and 53: PART EIGHT: DEFINITIONS The followi
Page 54 and 55: PART NINE: TERMS AND CONDITIONS OF
Page 56 and 57: eceived. The Offer will be closed a
Page 58 and 59: 6&7Intermediaries who are entitled
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Page 67: RF64820 Printed by Royle Financial

To: Mr Phillip Rhoden Esq Clubfinance Ltd P.O. Box 1036 Hemel ...

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