OAM2681 OVCT 2 Prospectus aw12 - Clubfinance

e inappropriate for Octopus to be incentivised to seek excess
returns when the primary objective is to reduce the risk as far
as possible.
In order to ensure the alignment of interests between Octopus and
Shareholders as described above, an annual management fee of an
amount equivalent to 2.0% of the net assets of the VCT will be rolled
up (interest free) and will only be paid to Octopus once Shareholders
have received back a minimum targeted return of 105p per Ordinary
Share (in the form of dividends and other distributions), after taking
account of, on a winding-up, the accrued management fees. This is
equivalent to a 50% return on the net cost of investment of 70p per
Ordinary Share.
In addition, Octopus will only be entitled to receive an annual
management fee for the period up to the date on which the annual
general meeting in 2016 is held (expected to be in June 2016) if
Shareholders approve the winding-up of the VCT. This will incentivise
Octopus to return capital to Shareholders at the earliest opportunity
upon winding-up.
Octopus VCT 2 will also pay to Octopus an annual accounting and
administration fee of 0.3% of net assets (plus VAT, if any, at the
applicable rate) and a company secretarial fee of £15,000 (plus
VAT if any, at the applicable rate) each year. These fees will not be
rolled-up.
THE OFFER
The Offer will be open from 28 January 2011 until the earlier of
12.00 pm on 28 April 2011 and the date on which the maximum
subscription is reached (or until such time as determined by the
Directors, not being later than 30 June 2011). The Offer is for
30,000,000 Ordinary Shares but, if there proves to be excess demand
from investors, the Directors may increase the size of the Offer by a
further 10,000,000 Ordinary Shares. The Ordinary Shares are being
offered at 100p per Ordinary Share. Application will be made to the
UK Listing Authority for the Ordinary Shares issued pursuant to the
Offer to be admitted to the Official List and to the London Stock
Exchange for admission to trading on its market for listed securities.
HOW TO INVEST
Application forms are attached at the end of the Prospectus. The
minimum investment is £3,000. Although there is no maximum size
of investment, tax reliefs are available on a maximum investment in
VCTs of £200,000 per individual in any one tax year.
KEY RISK FACTORS
Although the tax benefits available to investors in Octopus VCT 2 are
significant, there are a number of key risk factors of which investors
should be aware:
■ There can be no assurances that Octopus VCT 2 will meet its
objectives, identify suitable investment opportunities or be able to
diversify its portfolio. Please remember that the past performance
of the Investment Manager is no guide to future performance
and that the value of an investment into the VCT may fall as
well as rise and Shareholders may not receive back the full
amount invested.
■ There can be no guarantee that Octopus VCT 2 will qualify as a
VCT or that such status will be maintained which could lead to
adverse tax consequences for Shareholders, including a
requirement to repay the 30% income tax relief.
■ Prior to the winding-up that is expected to occur in 2016,
Shareholders may find it difficult to realise their investment in
Octopus VCT 2 and the price at which the Ordinary Shares are
traded may not reflect the net asset value of the VCT (however, it
is intended that the VCT will operate a buyback policy for the first
five years at the latest published net asset value).
■ Investment in unquoted companies, AIM-traded and PLUS Markettraded
companies by its nature involves a higher degree of risk
than investment in companies traded on the main market of the
London Stock Exchange and therefore may be difficult to realise.
■ The nature of energy-generating assets is that their useful
economic life is fixed and the assets tend to produce predictable
revenue streams over a protracted period (a number of decades)
during which, without refurbishment expenditure, the value of such
assets is likely to decline.
■ The operational profitability of potential investee companies may
be adversely affected by factors outside their control including,
inter alia, lower than projected wind speeds, divergence between
forecasted and actual levels of solar radiation, weather patterns,
change in government policies regarding renewable energy
subsidies, changes in the rates of Feed-in Tariffs, interest, inflation,
foreign exchange or tax, or by changes in prices of solar panels and
other capital equipment, lower than projected energy output,
downtime of plant and machinery, unavailability of grid connection,
higher than projected operating costs, availability and cost of
insurance and other unanticipated events that adversely
affect operations.
■ Should applications for only the minimum application level of
£1 million be received (resulting in only the Minimum Net
Proceeds of £945,000 being raised) or to the extent that a
relatively small level of funds is raised, the ability of Octopus VCT 2
to diversify its portfolio may be reduced and potential investors
should be aware that the fixed costs of running the VCT will be
proportionately higher.
This summary conveys the essential characteristics and risks associated with Octopus VCT 2 and the Ordinary Shares and should be read
as an introduction to the Prospectus. Any decision to invest should be based on consideration of the Prospectus as a whole by the
investor. Where a claim relating to the information contained in this Prospectus is brought before a court, the claimant investor might,
under the national legislation of the EEA states, have to bear the costs of translating the Prospectus before the legal proceedings are
initiated. Civil liability attaches to those persons who are responsible for this summary, but only if the summary is misleading, inaccurate or
inconsistent when read together with other parts of the Prospectus.
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