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

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InvestmentPolicy TheinvestmentpolicyfortheCompanyisasfollows: QualifyingInvestments QualifyingInvestmentscompriseinvestmentsinUKtradingcompaniesthatownsubstantialassetsorhavepredictablerevenue streamsfromfinanciallysoundcustomers. Nonqualifyinginvestments ThefundsnotemployedinQualifyingInvestmentswillbepredominantlyinvestedin: securedloans;and/or FixedIncomeSecurities. Secured loans will be secured on property or other assets. Fixed Income Securities will consist of bonds issued by the UK Government,majorcompaniesandinstitutionsandwillhavecreditratingsofnotlessthanAminus(Standard&Poor'srated)/A3 (Moody'srated).BothStandard&Poor'sandMoody'sareindependentratingagencies(neitherisregisteredintheEU). Borrowingpolicy It is not the Company's intention to have any borrowings. Under its Articles, the Company does, however, have the ability to borrowamaximumamountequalto50%oftheaggregateamountpaidonanysharesissuedbytheCompany(togetherwithany sharepremiumthereon). Asaconditionofeachofitsinvestments,itisintendedthattheCompanywillhavetheabilitytorestricttheinvesteecompany's ability to borrow. Typically, the Downing VCTs' investee companies have no external borrowings ranking ahead (for security purposes)oftheVCTs'investments.However,certaininvesteecompaniesmaybepermittedtoborrowlimitedsums(upto25%of thevalueoftheirassets)wheretheManagerbelievesitisprudenttodoso. In accordance with the Listing Rules, the Board will not make a material change to the Company's investment policy without Shareholderapproval. Targetallocation Initially, the majority of funds will be invested in nonqualifying investments. The level of funds invested in nonqualifying investmentswillbereducedtoprovidefundsforQualifyingInvestmentssuchthatwithinthreeyearsofthecloseoftheOffersthe approximateallocationwillbe: Investmentsplit Portfoliosplit QualifyingInvestments 75% Nonqualifyinginvestments 25% Total 100% Note: The above table represents the approximate split of the Company's portfolio. The Board may increase the proportion of Qualifying Investmentsabove75%toallowforthepossibilityofearlyrealisationswithoutbreachingtheVCTRegulations. VentureCapitalTrustRegulations IncontinuingtomaintainitsVCTstatus,theCompanycomplieswithanumberofregulationsassetoutinPart6oftheITA.How the main regulations apply to the Company is summarised as follows: (i) the Company holds at least 70% by value of its investments in Qualifying Companies; (ii) at least 30% of the Company's QualifyingInvestments (by value) areheldin "eligible shares"forfundsraisedbefore6April2011andatleast70%in"eligibleshares"forfundsraisedonorafter6April2011;(iii)at least10%ofeachinvestmentinaQualifyingCompanyisheldin"eligibleshares"(bycostattimeofinvestment);(iv)noinvestment constitutesmorethan15%oftheCompany'sportfolio(byvalueatthetimeofinvestment);(v)theCompany'sincomeforeach financialyearisderivedwhollyormainlyfromsharesandsecurities;(vi)theCompanydistributessufficientrevenuedividendsto ensurethatnotmorethan15%oftheincomefromsharesandsecuritiesinanyoneyearisretained;and(vii)noinvestmentmade bytheCompanycausesaninvesteecompanytoreceivemorethan£5millionofstateaidedinvestments(includingfromVCTs)in theyearendingonthedateoftheinvestment. ListingRules InaccordancewiththeListingRules:(i)theCompanymaynotinvestmorethan10%,inaggregate,ofthevalueofitstotalassetsat thetimeaninvestmentismadeinotherlistedclosedendedinvestmentfundsexceptlistedclosedendedinvestmentfundsthat havepublishedinvestmentpolicieswhichpermitthemtoinvestnomorethan15%oftheirtotalassetsinotherlistedclosedended investmentfunds;(ii)theCompanymustnotconductanytradingactivitywhichissignificantinthecontextofitsgroupasawhole; and(iii)theCompanymust,atalltimes,investandmanageitsassetsinawaywhichisconsistentwithitsobjectiveofspreading investmentriskandinaccordancewithitspublishedinvestmentpolicyassetoutinthisdocument.Thisinvestmentpolicyisinline withChapter15oftheListingRulesandPart6oftheITA. 5
ShareBuybackPolicy TheCompanywillmakemarketpurchasesofitsownGShares,uptoamaximumannualnumberofGSharesequivalentto14.9% of the total number of issued G Shares from time to time. The Board intendstooperate apolicyof purchasingGSharesthat becomeavailableasdetailedbelow(subjecttoliquidityandregulations).TheproceedsreceivedbyGShareholdersonthesaleof theirGSharestotheCompanywillbereducedbycostssuchasthemarketmaker'smarginandstockbroker'scommission. Sharebuybackpolicy DiscounttoNAV Fromlaunchto31December2017 Nil 1January2018onwards Boarddiscretion Fromlaunchto31December2017 TheCompanywillbuybackGSharesinthefirstfiveyearsfromlaunch(to31December2017),atnildiscounttoNetAssetValue, subjecttoregulationsandhavingsufficientliquiditywithintheCompany.Investorsshouldnotethatincometaxreliefof30%will berepayableiftheGSharesarenotheldfortheminimumholdingperiodoffiveyears;however,thereisnoclawbackofthe30% incometaxrelieffollowingthedeathofaShareholder.TheBoardanticipatesthattherewillbelimitedsharebuybacksofGShares within five years because the only sellers are likely to be deceased G Shareholders' estates and those G Shareholders whose circumstanceshavechanged(tosuchanextentthattheyarewillingtorepaythe30%incometaxreliefinordertogainaccessto thenetproceedsofsale). From1January2018onwards As stated below, in the section headed "Realisation Plans", after five years the Company will seek to exit from sufficient investmentsintheGSharepoolinordertoreturnfundstoGShareholderswishingtoexitatthattime.Therefore,tohelpachieve thisobjective,duringthisperiodtheBoardwillreservetherightastowhetheritwillundertakeGSharebuybacksandthelevelof discounttoNetAssetValueitwillundertakeanysuchGSharebuybacks. RealisationPlans ItisintendedthatGShareholderswillbegiventheoptiontoeitherexitorretaintheirinvestmentwithinapproximatelysixyears fromthecloseoftheOffers. Exitmechanism ItisintendedthattaxfreecashproceedswillbepaidtoGShareholderswhowishtoexit(netofthePerformanceIncentive,if applicable)bywayoftaxfreerevenueandcapitaldividendsand/orsharebuybacks(includingtenderoffers). Rolloveroption TheBoardbelievesthatsomeInvestorsmaywishtostayinvestedforlongtermtaxfreeincome.TheBoard,therefore,intendsto providearolloveroptionandwillprovidefulldetailsofthetermsinapproximatelyfiveyearsfromthecloseoftheOffers.Inthe eventthatarelativelysmallnumberofGShareholdersopttorollover,suchthatthenetassetsrolledoverforlongtermincome would be too low to support the administration costs of the Company, then, in these or other circumstances, the Board may decidetodistributeallthenetassetsandwinduptheGShareclass. Management Manager TheCompanyismanagedbytheManager,whoseexecutivesareprovidedbyDowningLLP. DowningLLP Downing Corporate Finance Limited was incorporated in 1986 and, since 1991 it has specialised in structuring, promoting, managing and administering tax efficient products. On 1 June 2011, Downing Corporate Finance Limited transferred all of its businessandemployeestoDowningLLP,whichisauthorisedandregulatedbytheFinancialServicesAuthority.DowningLLPis responsibleforthemanagementofover£210millionacross16VCTs. 6
Page 1 and 2: DOWNING PLANNED EXIT VCT 2 PLC 2013
Page 3 and 4: Thisdocument,theRegistrationDocumen
Page 5 and 6: LetterfromtheChairmanoftheCompany
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Page 11 and 12: Charges Annualfees TheManagerwillr
Page 13 and 14: PartII-Taxation VCTs:Summaryofthea
Page 15 and 16: 2011SHAREPOOL Debt(D)/ Cost Valuat
Page 17 and 18: "LondonStockExchange" "Management"
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Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report

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