Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report

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PartV–AdditionalInformation 1. TheCompany 1.1 Incorporation DowningPlannedExitVCT2plcwasincorporatedinEngland and Wales as a public limited company on 17 January 2005 with registered number 05334418. The principle legislation under which the Company operates and under which the A Shares, C Shares, D Shares, E Shares, F Shares and G Shares have been created is the 2006 Act (together with statutory instrumentscreatedpursuantthereto). 1.2 Borrowingpolicy TheDirectorsmayexerciseallthepowersoftheCompanyto borrow money and to mortgage or charge its undertakings, propertyanduncalledcapital.TheDirectorsshallrestrictthe borrowings of the Company and, by the exercise of the Company'svotingandotherrightsorpowersofcontrolover its subsidiary undertakings (if any), secure that they restrict their borrowings, so that the aggregate amount at any time outstanding in respect of money borrowed by the Group, being the Company and its subsidiary undertakings for the time being (excluding intragroup borrowings), shall not, withouttheprevioussanctionofanordinaryresolutionofthe Company, exceed a sum equal to 50% of the aggregate amountpaidonanysharesissuedbytheCompany(together withanypremiumpaidthereon). 1.3 Cancellationofthesharepremiumaccount TheDirectorsareawareofthepossibilitythattheCompany's Shares may trade at a discount to their net asset value at somepoint.TheDirectorsconsiderthattheCompanyshould have the ability to purchase its Shares in the market (such Sharestobeautomaticallycancelled)withtheaimofreducing anydiscountandincreasingthenetassetvalueperShareof the remaining Shares. In the view of the Directors, the awarenessofInvestorsthattheCompanyhassuchacapability may tend to moderate the scale of any discount which may emergeandtheactionofbuyinginsharesshouldenableany suchdiscounttobenarrowed. The 2006 Act provides that a public company may only purchaseitsownsharesoutofdistributableprofitsoroutof theproceedsofafreshissueofSharesmadeforthepurpose ofthepurchase.SubjecttoconfirmationfromHMRevenue& Customs that such proposals will not adversely affect the Company’sVCTstatusandCourtapproval,theCompanymay decide to reduce and/or cancel the share premium account (createdontheissueoftheGSharespursuanttotheOffers) and to transfer the balance of the special reserve, which is establishedbythecancellationofaprevioussharepremium account,whichmaybetreatedasadistributableprofit,outof which purchases of Shares can be made, subject to regulations,VCTRulesandcompanylegislation. 1.4 Stampdutyandclosecompanystatus TheCompanyhasbeenadvisedthatnostampdutyorstamp dutyreservetaxwillbepayableontheissueoftheGShares undertheOffers.OntheissueoftheGSharespursuanttothe Offers, the Company will not be a close company for tax purposes. 1.5 Materialinterests TheManagerwillbepaidanannualinvestmentmanagement feeof2.0%oftheNetAssetsattributabletotheGShares.In linewithnormalVCTpractice,theManagerwillbeentitledto receive a Performance Incentive. Further details of these arrangementsaresetoutinPartIofthisdocument. 1.6 Investorprofile AtypicalInvestorwillbearetailclient(notacorporate),who isaged18oroverandpaysUKincometax,whoalreadyhasa portfolio of nonVCT investments such as unit trusts/OEICs, investmenttrustsanddirectshareholdingsinlistedcompanies and has sufficient income and capital so that his/her investment in the Company can be held for over five years. The individual's income tax liability should be more than sufficienttoutilisealltheinitialincometaxreliefavailableon theinvestment.Theindividualshouldbewillingtoinvestover themediumtolongtermandbecomfortablewithhigherrisk investments. 1.7 ResultsoftheOffers The results of the Offers will be announced through a regulatoryinformationserviceprovider. 2. TaxationandHMRevenue&Customsapproval TheDirectorsintendtoconducttheaffairsoftheCompanyso thatitcontinuestosatisfytheconditionsforapprovalasaVCT and that such approval will be maintained. HM Revenue & CustomshasgrantedtheCompanyprovisionalapprovalasa VCTunderPart6oftheITA.TheCompanyintendstocomply with section 274 of the ITA and has retained PricewaterhouseCoopers LLP to advise it on VCT taxation matters. 3. Working capital and capitalisation and indebtedness statements 3.1 Workingcapital IntheopinionoftheCompany,theworkingcapitalavailable totheGroupissufficientforitspresentrequirements,thatis, foratleast12monthsfromthedateofthisdocument. 3.2 Statementofcapitalisationandindebtedness ThetablebelowshowsthecapitalisationoftheCompanyasat 31October2012(extractedfromtheunauditedmanagement accounts of the Company for the period ended 31 October 2012). £'000 Totalcurrentdebt Guaranteed Secured Unguaranteed/secured Totalnoncurrentdebt Guaranteed Secured Unguaranteed/secured Shareholders'equity Sharecapital 53 Otherreserves 23,991 24,044 Therehasbeennomaterialchangeinthecapitalisationofthe Company,totaldebtorshareholderequitysince31October 2012,otherthanallotmentsofFSharesadding£982toshare capitaland£981,636tootherreserves. 15
ThefollowingtableshowstheCompany'snetindebtednessasat 31 October 2012 (extracted from the unaudited management accountsoftheCompanyfortheperiodended31October2012). £'000 A Cash 3,948 B Cashequivalent C TradingSecurities D Liquidity(A+B+C) 3,948 E Currentfinancialreceivables 125 F Currentbankdebt G Currentpositionofnoncurrentdebt H Othercurrentfinancialdebt I Currentfinancialdebt(F+G+H) J Netcurrentfinancialindebtedness (4,073) (IED) K Noncurrentbankloans L Bondsissued M Othernoncurrentloans N Noncurrentfinancialindebtedness (K+L+M) O Netfinancialindebtedness(J+N) (4,073) The Company does not have any contingent or indirect indebtedness. 4. CreationoftheGShares The Company has issued a circular dated 10 January 2013 to holdersofCSharesand/orDSharesand/orFSharesconveninga generalmeetingon6March2013.Thefollowingresolutionswillbe proposed and are all conditional upon the passing of the other resolutionscontainedintheNotice: OrdinaryResolutions: 1) to create G Shares having the rightsand being subject to the restrictions set out in the Articles, to be altered pursuanttoresolution5describedbelow; 2) to authorise the Directors to allot up to an aggregate nominal amount of £38,500. The allotments referred to represent,inaggregate,approximately71.7%oftheissued share capital of the Company as at the date of this document. Such authority will expire on the later of 15 monthsfromthedatetheresolutionispassedandtheend oftheCompany’snextannualgeneralmeeting; 3) toapprovetheOfferAgreement; Specialresolutions: 4) toauthorisetheDirectorstoallotthesharesreferredtoin resolution 2 as if section 561(1) of the 2006 Act did not apply.Thisdisapplicationrepresentsapproximately71.7% of the Company's current issued share capital. This authority will expire on the later of 15 months from the datetheresolutionispassedandtheendoftheCompany’s nextannualgeneralmeeting; 5) to alter the Articles to, inter alia, provide for the rights attachingtotheGShares; 6) to authorise the Board to make market purchases of G Shares;and 7) toauthorisethecancellationofthesharepremiumaccount arisingontheissueoftheGShares. 5. DetailsoftheGShares 5.1 Distributionsofincomeandcapital G Shareholders shall be entitled to receive, in that capacity, dividends and any other distributions or a return of capital (otherwisethanonamarketpurchasebytheCompanyofanyof itsshares)outoftheassetsattributabletotheGShares,prorata totheirrespectiveholdingsofGShares. 5.2 Distributionsofassetsonawindingup The capital and assets attributable to the G Shares shall on a windingupbedistributedonthesamebasisassetoutunderthe heading"Distributionsofincomeandcapital". 5.3 Votingrights G Shareholders will be entitled to receive notice of, to attend, speak and vote at any general meeting, pari passu, in such respects with the holders of C Shares, D Shares and F Shares. EveryGShareholderpresentinpersonorbyproxyshallupona showofhandsoruponapoll,haveonevoteforeveryGShare heldbyhim/her. 7. OverseasInvestors (a) No person receiving a copy of this document or an Application Form in any territory other than the UK may treat the same as constituting an offer or invitation to him/her to subscribe for or purchase G Shares unless, in such territory, such offer or invitation could lawfully be made. (b) Noactionhasbeentakentopermitthedistributionofthis document in any jurisdiction outside the UK where such action is required to be taken. All Applicants will be required to warrant that they are not a US person as definedinparagraph5(x)ofPartVIofthisdocumentora residentofCanada. 7. Informationsourcedfromthirdparties Where information set out in this document has been sourced fromthirdpartiesthesourcehasbeenidentifiedattherelevant place in the document and the Company confirms that this information has been accurately reproduced and, as far as the Company is aware and able to ascertain from information published, no facts have been omitted which wouldrender the reproducedinformationinaccurateormisleading. 10January2013 16
Page 1 and 2: DOWNING PLANNED EXIT VCT 2 PLC 2013
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Page 5 and 6: LetterfromtheChairmanoftheCompany
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Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report

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