Electra Kingsway VCT Offer for Subscription - The Tax Shelter Report

Electra Kingsway VCT 

Mini Prospectus 

Offer for Subscription 

Sponsored by 

Brewin Dolphin

This document, which comprises a mini prospectus (“Mini Prospectus”), contains information, in 

summary form, drawn from the Company’s Prospectus dated 2 October 2001 (“the Prospectus”), which 

alone contains full details of the Company and the Shares. Terms defined in the Prospectus bear the same 

meaning when used in this document. The Directors are satisfied that this Mini Prospectus contains a fair 

summary of the key information set out in the Prospectus. The UK Listing Authority has authorised the 

issue of this document without approving its contents. 

In subscribing for Shares, you will be treated as subscribing solely on the basis of the Prospectus, which 

should be read in conjunction with this document and the Terms and Conditions of Application set out in 

this document and in the Prospectus. 

Application has been made for the Shares in the Company to be issued pursuant to the Offer to be 

admitted to the Official List and to trading on the London Stock Exchange’s market for listed securities. 

It is expected that such admission will become effective, and that dealings in the Shares will commence, 

on 25 January 2002. 

Brewin Dolphin Securities Limited is acting as sponsor and Downing Corporate Finance Limited as 

promoter of the Company in connection with the Offer, and neither of them are advising any other person 

or treating any other person as a customer or client in relation to the Offer, or will be responsible to any 

such person for providing the protections afforded to their respective customers or clients or for providing 

advice in connection with the Offer. 

If you require advice, you should consult your stockbroker, solicitor, accountant or professional adviser 

authorised under the Financial Services Act 1986. 

ELECTRA KINGSWAY VCT PLC 

(Incorporated in England and Wales under the Companies Act 1985 with registered number 4286368) 

Sponsor 

Brewin Dolphin Securities Limited 

Offer for Subscription 

for the 2001/2002 tax year 

of up to, in aggregate, 25,000,000 ordinary shares 

of 1p each at an issue price of 100p per share 

payable in full on application 

Promoter 

Downing Corporate Finance Limited 

Availability of the Prospectus and Mini Prospectus 

Copies of the Prospectus and the Mini Prospectus relating to the Company are available for inspection 

only during normal business hours on any weekday (Saturdays and public holidays excepted) at the UK 

Listing Authority’s Document Viewing Facility at 25 The North Colonnade, London E14 5HS for so long 

as the Offer remains open and may be obtained, free of charge, for so long as the Offer remains open, by 

collection from the Company’s registered office and from: 

Downing Corporate Finance Limited Brewin Dolphin Securities Limited Brewin Dolphin Securities Limited 

69 Eccleston Square 

London SW1V 1PJ 

Tel: 020 7411 4700 

5 Giltspur Street 

London EC1A 9BD 

PO Box 512, National House 

36 St Ann Street 

Manchester M60 2EP 

Completed Application Forms in respect of the Offer should be sent by post, or delivered by hand, to 

Downing Corporate Finance Limited, 69 Eccleston Square, London SW1V 1PJ. 

Electra Kingsway VCT 1

DEFINITIONS AND GLOSSARY 

Where used in this document the following words and expressions will, unless the context otherwise 

requires, have the following meanings: 

"Act" 

"AIM" 

"Annual Running Costs" 

"Applicant" 

"Application Form" 

"Articles" 

"BVCA" 

"Company" or "Electra Kingsway VCT" 

"Compound Return" 

"Directors" or "Board" 

"Downing" 

"Manager" 

"Electra Active Management" 

"Electra Investment Trust" 

"Electra Partners" 

"Funds managed by Electra Partners" 

"Fixed Income Securities" 

"FSA" 

"ICTA" 

"Investor" 

"London Stock Exchange" 

"Management and Administration Deed" 

"Net Assets" 

"OFEX" 

"Offer Price" 

"Offer" 

"Official List" 

"Prospectus" 

"Qualifying Company" 

"Qualifying Investment" 

"RPI" 

"Share" 

"Shareholders" 

"Sponsor" or “Brewin Dolphin” 

"UK Listing Authority" 

"VCT" 

Companies Act 1985 (as amended) 

Alternative Investment Market of the London Stock Exchange 

annual costs incurred by the Company in the ordinary course of its business 

(including irrecoverable VAT) 

Investor, who subscribes for Shares pursuant to the Prospectus 

form of application for Shares under the Offer set out at the end of this 

document 

Articles of Association of the Company 

British Venture Capital Association 

Electra Kingsway VCT Plc 

internal rate of return as more fully described in paragraph 6(l) of Part III of the 

Prospectus 

directors of the Company 

Downing Corporate Finance Limited, which is regulated by the FSA 

Electra Quoted Management Limited 

Electra Active Management Plc 

Electra Investment Trust Plc 

Electra Partners Limited and/or its subsidiaries; Electra Quoted Management 

Limited and Electra Partners Europe Limited 

Electra Active Management and Electra Investment Trust 

investments made by the Company which do not comprise Qualifying 

Investments, such as bank deposits, loan stock, bonds, preference shares and 

other investments creating or acknowledging indebtedness issued by or on 

behalf of the governments of the United Kingdom and Northern Ireland or any 

other European Union country or any company or other financial institution 

with a credit rating (other than in respect of preference shares) of not less than 

A minus (Standard & Poors rated) or A3 (Moodys rated) or equivalent ratings 

Financial Services Authority 

Income and Corporation Taxes Act 1988 (as amended) 

individual investor, who is a UK resident aged 18 or over, investing no more 

than £100,000 in VCTs in any one tax year 

London Stock Exchange plc 

agreement dated 2 October 2001 between the Company (1) and the Manager 

(2), a summary of which is set out in paragraph 5(c) of Part III of the 

Prospectus 

gross assets less all liabilities (excluding contingent liabilities) of the Company 

(calculated each 31 March and 30 September) 

trading facility operated by J P Jenkins Limited to facilitate trading in securities 

neither quoted nor dealt in on the London Stock Exchange 

100p per Share 

offer for subscription of up to, in aggregate, 25,000,000 Shares 

Official List of the UK Listing Authority 

document which describes the Offer in full 

unquoted company carrying on a qualifying trade wholly or mainly in the 

United Kingdom and which satisfies certain other conditions as defined in 

Schedule 28B ICTA 

investment in an unquoted trading company, which comprises a qualifying 

holding for a VCT as defined in Schedule 28B ICTA 

Retail Prices Index 

ordinary share of 1p in the capital of the Company 

holders of Shares 

Brewin Dolphin Securities Limited, which is regulated by the FSA 

Financial Services Authority acting in its capacity as the competent authority 

for the purposes of Part IV of the Financial Services Act 1986 

company approved as a venture capital trust under Section 842AA ICTA by the 

Board of the Inland Revenue 

2 Electra Kingsway VCT

KEY INFORMATION 

This key information is extracted (without 

material adjustment) from, and should be 

read in conjunction with, the full text of this 

document. In particular, your attention is 

drawn to the Risk Factors and Investment 

Considerations on pages 9 and 10 of this 

document 

Objective 

The Company’s objective is to maximise tax 

free income to Shareholders from dividends and 

capital distributions. It is intended that this 

objective will be achieved by investing the 

proceeds of the Offer, over time, in a portfolio of 

Qualifying Investments and in Funds managed 

by Electra Partners. 

Investment Strategy 

The Company will seek to invest in a diversified 

portfolio of unquoted and AIM listed companies. 

Unquoted investments will typically be in 

companies that intend to float on a market within 

a two year period or those that have a well 

developed growth and cash generation strategy. 

Investments in start-up companies, in particular 

technology companies, will generally be 

avoided, where levels of risk are unacceptably 

high. 

Subject to market conditions and Board 

approval, it is intended that, of the Company’s 

initial Net Assets, up to 15% will be invested in 

Electra Investment Trust and up to 15% in 

Electra Active Management, over a twelve 

month period. 

Manager 

The Company’s investments will be managed by 

Electra Quoted Management Limited, which is a 

subsidiary of Electra Partners Limited. Electra 

Partners has offices in London, Paris, Frankfurt, 

New York and Hong Kong. Electra Partners 

manage Electra Investment Trust (net assets of 

approximately £700 million as at June 2001), a 

€1 billion European private equity fund and 

other specialist funds. In total, Electra Partners 

managed investments valued at in excess of £1.5 

billion, as at June 2001. 

Track Record of Electra Partners 

Electra Partners has invested over £500 million 

in the last six years in quoted and unquoted 

companies. Of those investments, £29 million 

was invested in 33 smaller unquoted and AIM 

listed companies, which were similar in size and 

type to those proposed for the investment 

portfolio of the Company. As at 30 June 2001, 

£39 million had been realised from these 33 

investments and the residual holdings were 

valued at £18 million, generating a Compound 

Return of 28% per annum over the period 1 June 

1995 to 30 June 2001. (Source: Manager) 

Tax Benefits for Investors 

• Income tax relief at 20% of the amount 

subscribed. 

• Capital gains tax deferral at up to 40%. 

• Tax-free dividends and capital distributions. 

• Capital gains tax exemption on the disposal 

of ordinary shares in a VCT. 

• Tax reliefs are available on a maximum 

investment of £100,000 per individual 

(across all VCT investments) in any one tax 

year. 

The Offer 

• A maximum of 25 million Shares are 

available under the Offer. 

• The Directors and executives of Electra 

Partners, including their immediate family, 

will be investing over £200,000 under the 

Offer, on the same terms as Investors. 

OFFER STATISTICS 

Offer price per Share 

100p 

Initial issue costs per Share 

5p 

Initial net assets per Share 

95p 

Maximum number of Shares in issue, following the Offer, at full subscription 25,000,000 

Maximum net proceeds of the Offer, after issue costs, at full subscription £23,750,000 


PART I 

INTRODUCTION 

VCTs were introduced by the Finance Act 1995 

to encourage UK individuals, by way of tax 

benefits, to invest in a portfolio of investments 

comprising at least 70% in unlisted UK trading 

companies. VCTs are investment companies, 

whose shares are listed on the Official List and 

are traded on the London Stock Exchange. In 

the period from 1 August 1995 to 5 April 2001, 

over £1.3 billion was raised by 60 VCTs 

(source: PricewaterhouseCoopers). 

VCTs are created so that their investors can 

benefit from a spread of Qualifying Investments 

under the supervision of professional managers, 

who can in many cases contribute valuable 

experience, contacts and advice to the businesses 

in which they invest. VCTs have to be approved 

by the Inland Revenue for the purposes of the 

venture capital trust legislation. Investors are 

then entitled to income tax relief at 20% of the 

amount subscribed and deferral of capital gains 

tax at up to 40%. VCTs are entitled to 

exemption from corporation tax on any gains 

arising on the disposal of their investments and 

such gains may be distributed tax-free to 

Investors. 

TAXATION BENEFITS TO INVESTORS 

(see Part II for further details) 

The principal tax reliefs, which are available on 

a maximum investment of £100,000 per 

individual (across all VCT investments) in any 

one tax year, are set out below: 

• Income tax relief at 20% of the amount 

subscribed provided that the VCT shares are 

held for at least three years. 

• Deferral of capital gains at up to 40%, by 

reinvesting the gain into a VCT, provided 

the VCT shares are issued in a period 

beginning 12 months before, and ending 12 

months after, the gain is realised. Capital 

gains deferral ceases upon disposal of shares 

in a VCT. 

• Tax-free dividends and capital 

distributions from a VCT. 

• Capital gains tax exemption on the 

disposal of ordinary shares in a VCT. 

The above is only a brief summary of the law 

concerning the tax position of investors in 

VCTs and is based on the understanding of 

current law and practice in relation to VCTs. 

Potential Investors are recommended to consult 

their own independent professional adviser as to 

the taxation consequences of their investing in a 

VCT. 

OBJECTIVE 

The Company’s objective is to maximise tax 

free income to Shareholders from dividends and 

capital distributions. It is intended that this 

objective will be achieved by investing the 

proceeds of the Offer, over time, in a portfolio of 

Qualifying Investments and in Funds managed 

by Electra Partners, as described under 

“Investment Strategy” below. 

INVESTMENT STRATEGY 

Electra Kingsway VCT offers Investors the 

opportunity to invest in a carefully selected 

portfolio of smaller companies that have high 

growth potential. By building a well diversified 

portfolio, the Manager believes that the risky 

nature of small individual venture capital 

investments will be minimised. 

The table below summarises the intended 

approximate split of investments to be held by 

the Company both initially and after three years. 

Type of Investment 

Percentage of Net Assets 

Initially 

After 3 Years 

Qualifying Investments 0% 80% 

Funds managed by 

30% 

20% 

Electra Partners 

(within 12 months) 

Fixed Income Securities 70% 0% 

Total 100% 100% 


The Directors intend that approximately 70% of 

the Company’s initial net proceeds will be 

invested in a portfolio of Fixed Income 

Securities. It is intended that this portfolio will 

be progressively realised over a two to three 

year period in order to fund investments in 

Qualifying Companies. By 30 September 2004, 

the Manager intends to have invested 

approximately 80% of the Company’s funds in 

Qualifying Investments. 


approval, it is intended that the balance of the 

Company’s initial proceeds, approximately 30%, 

will be invested in Funds managed by Electra 

Partners (see Non-Qualifying Investments 

below). 

Qualifying Investments 

The Manager will seek to invest in companies 

that it believes have a high growth potential. In 

the Manager’s opinion, each of these companies 

will generally reflect the following criteria: 

• it must have a well defined business plan 

and be able to demonstrate strong demand 

for its products or services; 

• its products or services can be supplied at 

sustainable high margins and be cash 

generative; 

• the objectives of its management and its 

shareholders are similarly aligned; and 

• it has adequate capital resources or access to 

further resources to achieve the targets set 

out in its business plan. 

The Company will seek to invest in a diversified 

portfolio of unquoted and AIM listed companies 

and will not specialise in any particular industry 

sector. Unquoted investments will typically be 

in companies that intend to float on a market 

within a two year period or those that have a 

well developed growth and cash generation 

strategy. There are no criteria regarding the size 

of the target companies although an investee 

company’s gross assets will not exceed £15 

million immediately prior to the investment in 

order to comply with the VCT legislation. 

Investments in start-up companies, in particular 

technology companies, will generally be 

avoided, where levels of risk are unacceptably 

high. 

It is anticipated that after three years the 

Company will have invested approximately 80% 

of its Net Assets in 25-35 Qualifying 

Companies. Investments are expected to range 

in size from £250,000 to £1 million, with an 

average investment of over £500,000. 

In the Manager’s opinion, companies listed on 

AIM have similar characteristics to unquoted 

companies and, therefore, require substantial due 

diligence before committing to an investment. 

The unquoted investment methodology at 

Electra Partners has been built on 

comprehensive due diligence and it is the 

combination of these skills and the investment 

experience of the management team that, in the 

Directors’ opinion, could provide Electra 

Kingsway VCT with a competitive advantage. 

Non-Qualifying Investments 

Funds managed by Electra Partners 


approval, it is intended that, of the Company’s 

initial Net Assets, up to 15% will be invested in 

Electra Investment Trust and up to 15% in 

Electra Active Management, over a twelve 

month period. In order to fund investments in 

Qualifying Companies, it is expected that the 

Company’s investments in the Funds managed 

by Electra Partners will be progressively 

reduced to approximately 20% of its Net Assets 

by 30 September 2004. 

Fixed Income Securities 

Downing will advise the Manager on the Fixed 

Income Securities investments of the Company. 

It is intended that the emphasis will be on fixed 

interest securities of high credit quality to 

provide a high level of capital protection. 

Therefore, the Fixed Income Securities will 

mainly consist of bonds issued by the UK 

Government, major companies and institutions. 

Downing, which is regulated by the FSA, will be 

paid a fee of 0.1% per annum (plus VAT) of the 

value of the Fixed Income Securities, subject to 

a minimum annual fee of £5,000 (plus VAT). 


THE MANAGER 

The Company’s investments will be managed by 

Electra Quoted Management Limited, which is a 

subsidiary of Electra Partners Limited. It was 

established in 1981 and is regulated by the FSA. 

Electra Partners has offices in London, Paris, 

Frankfurt, New York and Hong Kong. 

Electra Partners was acquired by its management 

in 1999. Electra Partners manage Electra 

Investment Trust (net assets of approximately 

£700 million as at June 2001), a €1 billion 

European private equity fund and other specialist 

funds. In total, Electra Partners managed 

investments valued at in excess of £1.5 billion, 

as at June 2001. Electra Partners therefore has 

experience of investing in unquoted companies 

and AIM listed companies of the same type to 

those proposed for the investment portfolio of 

the Company. Due to the VCT legislation, the 

Company will be making smaller investments 

than the majority of those investments 

previously made by the other funds managed by 

Electra Partners. 

Deal Flow 

Electra Partners has a well developed deal flow 

comprising unquoted company proposals that 

come through Electra Partners’ own contacts and 

network, pre-float finance opportunities and 

broker led AIM flotations. 

Investment Committee 

The Manager has established an investment 

committee for Electra Kingsway VCT 

comprising the following: 

Hugh Mumford (55), joined Electra Partners in 

1981 and has been its managing director since 

1991. Following the management buy-out of 

Electra Partners from Electra Investment Trust 

in November 1999, he has become the chief 

executive officer of the new company. He has 

represented Electra Partners on the board of a 

number of private equity investments and has 

chaired the Electra Partners’ investment 

committee since 1989. His responsibilities have 

included overseeing all Electra Partners 

investment activities, which include both private 

equity and listed investments. 

David Symondson (46), joined Electra Partners 

in 1983, after spending six years with KPMG 

where he qualified as a chartered accountant. He 

has been a member of Electra Partners’ 

unquoted investment committee and is a director 

of a number of portfolio companies. He has been 

directly responsible for a number of Electra 

Partners’ unquoted investments and has 

considerable experience in the venture capital 

marketplace. 

Nicholas Ross (38), joined Electra Partners in 

1993 and is a director of Electra Quoted 

Management Limited. He has been principally 

involved in running the quoted portfolio of 

Electra Investment Trust and latterly managing 

Electra Active Management. He is an associate 

of the Institute of Investment Management and 

Research and prior to joining the Manager he 

worked as an analyst and fund manager at 

Provident Mutual. 

Rhian Davies (36), joined Electra Partners in 

1992 and has extensive experience of investing 

in unquoted companies and the venture capital 

marketplace. She has represented Electra 

Partners on a number of investee boards. Prior 

to joining Electra Partners, she qualified as a 

chartered accountant with Price Waterhouse and 

spent a number of years in the Corporate 

Reconstruction and Insolvency Department of 

the firm. 

Michael George (28), joined Electra Partners in 

2001. He previously worked at Durlacher 

Corporation Plc as head of private wealth 

management and was responsible for fund 

raisings, project management and exits of 

portfolio companies. Prior to that he worked at 

Laing and Cruickshank Investment Management 

as a fund manager. 

Track Record of Electra Partners – Smaller 

venture capital investments 

Electra Partners has invested over £500 million 

in the last six years in quoted and unquoted 

companies. Of those investments, £29 million 

was invested in 33 smaller unquoted and AIM 

listed companies which were similar in size and 

type to those proposed for the investment 

portfolio of the Company. As at 30 June 2001, 

£39 million had been realised from these 33 

investments and the residual holdings were 

valued at £18 million, generating a Compound 

Return of 28% per annum over the period 1 June 

1995 to 30 June 2001 (as set out in the table 

below). (Source: Manager) 


Returns on smaller venture capital investments invested in and managed by Electra Partners 

over the period 1 June 1995 to 30 June 2001 

Note Annual Compound Return 

Returns on smaller venture capital investments 1 28% 

(including unrealised investments at valuation) 

Note: 

1. This is the annual Compound Return (calculated on a monthly cash inflow and outflow basis) from 

all smaller venture capital investments (realised and unrealised) invested in and managed by Electra 

Partners before deduction of fund management costs and carried interest over the period 1 June 1995 

to 30 June 2001. All investments, which remain in the portfolio as at 30 June 2001, are valued either 

based on their quoted share price or by reference to internal carrying values. These valuations have 

been performed in accordance with BVCA guidelines. 

(Source: Manager) 

Prospective Investors should note that the past 

performance of Electra Partners is not 

necessarily a guide to the future performance of 

the Company and no projection or forecast is to 

be inferred from the above. 

Track Record of Electra Partners – Funds 

managed by Electra Partners 

Electra Investment Trust is one of the largest 

UK investment trusts specialising in investing in 

small and medium sized unquoted companies. 

Over the 10 year period to 30 March 2001 (last 

published valuation date), its net asset value has 

risen by 203% compared with the FTSE All 

Share Index which increased by 127%. 

Electra Active Management is an authorised 

open ended investment company which invests 

in special situations in quoted UK smaller 

companies. Its objective is to invest in 

undervalued companies where corporate 

initiatives can create value for shareholders. It 

was launched on 30 March 2000 with £30 

million raised from institutions. Electra Active 

Management’s total return had increased by 

5.2% by the end of June 2001 compared to the 

FTSE SmallCap Index which had decreased by 

10.3% over the same period. 

Co-investment Arrangements 

As the other funds managed by Electra Partners 

presently invest in opportunities that in most 

cases would not represent Qualifying 

Investments there may only be occasional 

opportunities for co-investment between the 

Company and the other funds managed by 

Electra Partners. Where such a co-investment 

opportunity arises, the Company will invest in 

the same securities as the funds with which it coinvests 

and the investment price and terms will 

be the same for each fund. Any such co- 

investment must first be approved by those 

Directors that are independent of the Manager, 

and the size of investment will be determined on 

a case by case basis. 

DIRECTORS 

The Company has five Directors, all of whom 

are non-executive and four of whom are 

independent of the Manager. Nicholas Ross, 

who is also an executive of the Manager, will not 

vote on any matter at a Company board meeting 

or at a committee of the Manager where there is 

a conflict of interest with any other Electra 

Partners’ fund which he manages. 

Rupert Pennant-Rea (chairman) (53) is a 

former Deputy Governor of the Bank of England 

and editor of the Economist. He is currently 

chairman of The Stationery Office and a director 

of Key Asset Management (UK) Limited, 

British American Tobacco plc and a number of 

other companies. 

Michael Broke (65) is currently a non executive 

director of Chelsfield plc, having joined the 

board in October 1987 as managing director. He 

was chief executive of Stockley plc from 

January 1984 to June 1987 and prior to that a 

director of J. Rothschild & Co. Previous 

directorships have included Stalwart Group 

Limited (chairman) (now known as GE Life 

Group Limited), Aspen Healthcare Holdings 

Limited (chairman) and Ashbourne Group plc. 

David Donnelly (53) is currently executive 

chairman of Gordon House Asset Management 

plc. He is chief investment officer of The 

Gordon House Optimal Fund plc. Previous 

directorships have included The ECU Trust plc, 

Highland Participants plc and R&W Hawthorn 

Leslie plc. 


Nicholas Ross (38) is an executive of the 

Manager. Further information is provided in 

the section headed “Investment Committee” 

above. 

David Sebire (58) is a chartered accountant with 

extensive industrial and corporate finance 

experience. Until 1999 he was chairman of 

Bridport PLC. He was a non-executive director 

of DPS Typecraft Limited, a developer of 

software for the publishing industry, from its 

formation until it was reversed into Highbury 

House Communications PLC, a magazine and 

on-line publisher, of which he is now a nonexecutive 

director. 

The Directors and executives of Electra Partners, 

including their immediate family, will be 

investing over £200,000 under the Offer, on the 

same terms as Investors. 

COSTS 

Capital raising fees 

Downing has agreed to underwrite all the costs 

of the Offer in return for an initial fee of 5% of 

the monies raised (i.e. 5p per Share), together 

with an annual commission of 0.25% per annum 

of the net assets of the Company for up to 10 

years. Out of these fees, Downing will be 

responsible for paying initial and annual trail 

commissions to authorised financial advisers. 

Annual fees 

The Annual Running Costs of the Company are 

capped at 3.6% of its Net Assets; any excess 

will either be paid by the Manager or refunded 

by way of a reduction to its fees. Annual 

Running Costs include, inter alia, Director’s 

fees, fees for audit and taxation advice, 

registrar’s fees, costs of communicating with 

Shareholders and all the annual fees payable to 

the Manager and Downing (including the 

annual commission of 0.25% referred to above) 

but do not include any performance incentive 

payments to the Manager (as described more 

fully below). The Manager will be paid an 

administration fee of £60,000 per annum (plus 

RPI plus VAT) for administering the Company 

(out of which it will pay Downing an advisory 

fee of £20,000 per annum plus RPI plus VAT), 

together with an annual investment 

management fee (plus VAT), based on the Net 

Assets of the Company, on the following basis: 

Period to 30 September % of Net Assets 

2002 1.50% 

2003 2.00% 

2004 and after 2.50% 

Electra Partners receives fees from monies 

invested in the Funds managed by Electra 

Partners; however, the aggregate management 

fee payable by the Company to Electra Partners, 

including fees from investments in the Funds 

managed by Electra Partners, will not exceed the 

fee payable to the Manager under the 

Management and Administration Deed, as 

summarised above. 

At full subscription, the Directors estimate that 

the Annual Running Costs will be approximately 

2.9% of the amount subscribed under the Offer 

in the Company’s first accounting period. It is 

intended that the fees payable by the Company 

to the Manager will be allocated not less than 

25% to revenue and up to 75% to capital. 

Performance Incentive 

As is customary in the venture capital industry, 

the Manager will be entitled to receive a 

performance related incentive fee based upon 

returns to Shareholders. If the Company’s net 

asset value per Share in a relevant period 

increases so that it exceeds £1 (less the value of 

any distributions paid from time to time) plus 

notional interest thereon at the rate of 7% per 

annum (compounding annually), then the 

beneficiaries will be entitled to an incentive 

equal in value to 20% of such excess. The first 

such period will expire on 30 September 2004 

and thereafter the periods will be of one year’s 

duration. In the event that the performance of 

the Company falls short of the target in any 

period such shortfall must be made up before the 

beneficiaries are entitled to any incentive in 

respect of subsequent periods. 

DIVIDEND POLICY 

A significant benefit of a VCT, not available to 

an investment trust, is the ability to distribute 

realised capital gains. Taking full advantage of 

this benefit, the Directors intend to maximise the 

stream of tax free dividend distributions, 

primarily from the successful realisation of 

investments for cash and also partly from 

income. Initially, this will be achieved by the 

Company being structured as an investment 


company, which enhances its ability to pay 

dividends out of income (initially from the Fixed 

Income Securities). Subsequently, when the 

Directors consider it appropriate to distribute 

accumulated net capital profits by way of 

dividend (for example, on the disposal of a 

successful equity investment), it is intended that 

investment company status will be revoked 

indefinitely to enable capital distributions to be 

made. 

Subject to maintaining sufficient working 

capital, the Directors intend to maximise tax-free 

dividend distributions to Shareholders. It is 

intended that dividends will be paid once a year 

in February. The first dividend is expected to be 

paid in February 2003 as a final dividend in 

respect of the period ending 30 September 2002, 

although this is not intended to be a forecast of 

profitability or dividend levels. 

Following the events on 11 September 2001 in 

New York, the Directors believe that it is very 

difficult for them to predict, in general, the return 

on unquoted and AIM listed companies. 

However the Directors do believe that there are 

still good returns to be made from these types of 

investments in the longer term, and remain 

confident. 

RISK FACTORS AND INVESTMENT 

CONSIDERATIONS 

Prospective Shareholders should be aware that 

the value of Shares in the Company and the 

income from them can fluctuate. In addition, 

there is no guarantee that the market price of 

Shares will fully reflect their underlying net 

asset value or the ability to buy and sell at that 

price. The Company’s initial net assets will, 

after issue costs of 5p, be 95p per Share. 

Furthermore, in the opinion of the Directors, 

investing in the Company carries particular 

risks, of which the principal risks are set out 

below: 

• Although it is intended that the Company 

will be managed so as to qualify as a VCT, 

and retain such status, there is no guarantee 

that such status will be achieved or 

maintained. Further details of the taxation 

implications of an investment in the 

Company are set out in Part II of this 

document. However, if the Company fails 

to meet the qualifying requirements for a 

VCT, this could result in: 

(i) Shareholders being required to repay 

the 20% income tax relief received on 

subscription for Shares; 

(ii) any capital gains tax liability deferred 

by Shareholders on subscription for 

Shares becoming payable; 

(iii) the loss of income tax relief on 

dividends paid (or subsequently 

payable) to Shareholders; 

(iv) the loss of tax relief previously 

obtained in relation to corporation tax 

on capital gains made by the Company; 

(v) a liability to tax on capital gains on any 

disposal of Shares; and 

(vi) the loss of the Company’s listing on the 

Official List and the ability of its 

Shares to be traded on the London 

Stock Exchange. 

• The levels and bases of reliefs from taxation 

may change. The tax reliefs referred to in this 

document are those currently available and 

their value depends on the individual 

circumstances of Shareholders. In addition, 

rates of capital gains tax and the availability 

of reliefs may change and adversely affect 

the tax position of a Shareholder deferring 

capital gains. 

• An investment in a VCT is free from tax on 

capital gains. Consequently, any realised 

losses on disposal of Shares cannot be used to 

create an allowable loss for capital gains tax 

purposes. In addition, for those Shareholders 

sheltering a realised capital gain, the amount 

of the original gain will be chargeable on 

disposal of Shares at the then prevailing rate 

of capital gains tax at the time of disposal 

(subject to the availability of allowances and 

reliefs). 

• Although the Shares will be listed on the 

Official List and traded on the London Stock 

Exchange, there is unlikely to be a liquid 

market in the Shares at least for the first three 

years from investment and there may not be 

two competitive market makers. It may, 

therefore, prove difficult for Shareholders to 

sell their Shares. 

• Most of the Company’s investments will be 

in companies whose securities are not 

publicly traded or freely marketable and may, 

therefore, be difficult to realise. Such 

businesses may well be in high risk sectors 

and are usually exposed to greater risks than 

established businesses. 

• In order to comply with VCT legislation, the 

Qualifying Companies, in which the 


Company will invest at least 70% of its 

capital within three years, must have gross 

assets of not more than £15 million prior to 

investment. Such companies generally have 

a higher risk profile than larger companies. 

• There is no guarantee that the Company’s 

objective will be met or that suitable 

investment opportunities will be identified. 

• The Company’s ability to obtain maximum 

value from its investments (for example, 

through sale) may be limited by the 

requirements imposed in order to maintain 

the tax status of the Company (such as the 

obligation to have at least 70% by value of its 

investments in Qualifying Investments). 

• Shareholders should be aware that the sale of 

Shares within three years of their subscription 

will require repayment of the 20% income 

tax relief available upon investment to the 

extent of the amount received from such sale. 

Accordingly, investment in the Company is 

not suitable as a short or medium term 

investment. 

• A Shareholder’s initial income tax relief will 

be withdrawn if a Shareholder, or any person 

associated with the Shareholder, takes out a 

loan which would not have been made, or 

would not have been made on the same 

terms, save for the acquisition of Shares. 

• The past performance of investments made 

by funds managed by the Manager or Electra 

Partners should not be regarded as an 

indication of the performance of investments 

to be made by the Company. 

• Changes in legislation concerning VCTs in 

general, and Qualifying Investments and 

qualifying trades in particular, may restrict or 

adversely affect the ability of the Company to 

meet its objectives and/or reduce the level of 

returns which would otherwise have been 

achievable. 

• The value of Shares may go down as well as 

up and Shareholders may not receive back 

the full amount invested. 

OTHER INFORMATION 

Duration of the Company 

Although it is not intended that the Company 

should have a limited life, Shareholders will be 

given the opportunity to review its future after 

approximately ten years and, thereafter, at five 

yearly intervals. Accordingly, the Articles 

contain provisions requiring the Directors to 

propose a resolution at the Company’s annual 

general meeting in 2012 to seek confirmation 

from Shareholders that it should continue as a 

VCT and, if passed, inter alia, such a resolution 

will be proposed at five yearly intervals 

thereafter. For such a resolution not to be passed, 

Shareholders holding at least 25% of the Shares 

then in issue must vote (in person or by proxy) 

against the resolution. If such a resolution to 

continue is not passed, the Directors will, within 

the following nine months, convene an 

extraordinary general meeting at which new 

proposals for the re-organisation, unitisation or 

voluntary liquidation of the Company will be 

submitted to Shareholders, as is deemed 

appropriate at that time. 

Valuation of Investments 

Listed investments (including those quoted on 

AIM and OFEX) will be stated at middle market 

prices discounted, where necessary, to reflect 

any lack of liquidity. 

Unquoted investments will be valued by the 

Directors in accordance with the following rules, 

which are consistent with the BVCA’s 

guidelines: 

• - investments held for less than 12 

months will usually be valued at cost; 

• - investments held for more than 12 

months will also be held at cost, unless: 

• a company is well-established and 

profitable: in which case, the shares 

will be valued by applying a suitable 

price-earnings ratio to the company’s 

historic or forecast post-tax earnings. 

This ratio will be based on comparable 

listed companies less an appropriate 

discount to reflect the company’s size 

and the lack of marketability of the 

investment; or 

• a value is indicated by a material 

arm’s-length transaction by a third 

party in the shares of the company; or 

• a company’s under-performance 

against plan indicates a diminution in 

value of the investment: in which case, 

a provision against cost will be made 

as appropriate. 

Borrowing Policy 

The Articles allow the Company to borrow up to 

an amount equal to its adjusted capital and 

reserves. Although the Directors have no 

present intention of using this power, it has been 


made available to give the Company flexibility, 

if required, in future unforeseen circumstances. 

Reporting to Shareholders 

The Company’s annual report and accounts will 

be made up to 30 September in each year and 

will normally be sent to Shareholders in 

December. The Company’s first accounting 

period will end on 30 September 2002. 

Shareholders will also receive unaudited interim 

reports and the first report to be sent to them will 

be the interim report in respect of the period 

ending 31 March 2002. 

Taxation and Inland Revenue Approval 

The Directors intend to conduct the affairs of the 

Company so that it satisfies the conditions for 

approval as a VCT and that such approval will 

be maintained. The Inland Revenue has agreed 

to grant the Company provisional approval 

under Section 842AA ICTA as a VCT, effective 

from the first day on which Shares are issued 

pursuant to the Offer. The Company intends to 

comply with Section 842AA ICTA and has 

retained PricewaterhouseCoopers to advise it on 

VCT taxation matters. 

New Special Reserve 

The Directors are aware of the possibility that 

the Shares may trade at a discount to their net 

asset value at some point. The Directors 

consider that the Company should have the 

ability to purchase its Shares in the market 

(which are thereby automatically cancelled), 

subject to the provisions of the Listing Rules of 

the UK Listing Authority, with the aim of 

reducing any discount and increasing the net 

asset value per Share of the remaining Shares. 

In the view of the Directors, the awareness of 

Investors that the Company has such a capability 

may tend to moderate the scale of any discount, 

which may emerge, and the action of buying in 

Shares should enable any such discount to be 

narrowed. 

The Act provides that a public company may 

only purchase its own shares out of distributable 

profits or out of the proceeds of a fresh issue of 

shares made for the purpose of the purchase. 

Subject to Inland Revenue confirmation that 

such proposals will not adversely affect the 

Company’s VCT status and Court approval, the 

Company intends to reduce its share premium 

account (created on the issue of the Shares 

pursuant to the Offer) by 50% of the amount 

standing in the credit thereof immediately 

following the issue of Shares pursuant to the 

Offer and to establish a new special reserve, 

which may be treated as a distributable profit, 

out of which purchases of Shares can be made. 

Shareholder approval will not be required for 

these actions, as the necessary empowering 

resolutions were passed on 24 September 2001. 

The Offer and Minimum and Maximum 

Subscription 

The Shares are offered at 100p each, payable in 

full upon application. A maximum of 25 million 

Shares, which are being offered to the public, are 

being made available under the Offer. The 

maximum amount receivable under the Offer is 

£25 million, in aggregate, before expenses. In 

the event that applications are received in excess 

of the maximum subscription under the Offer, 

the Directors and the Sponsor reserve the right to 

use their absolute discretion in the allocation of 

successful applications. Such discretion will 

give priority initially to applications received by 

22 October 2001 from existing shareholders in 

Electra Investment Trust, then to other 

Applicants, or their agents, who have made, or 

will make, informal reservations with Downing 

(subject to a maximum of 5 million Shares) and, 

thereafter, to the earliest Applicants. Applicants 

are encouraged to submit their Application 

Forms early in order to be confident that their 

applications will be successful. The minimum 

subscription level for the Offer is £1 million. If 

applications for the minimum subscription are 

not received by 5.00 p.m. on 14 December 2001, 

the Offer will be withdrawn. The Offer is not 

underwritten. 

The minimum investment per Investor is £5,000. 

The maximum investment per Investor is 

£100,000 per tax year, since tax reliefs are 

available on a maximum investment of £100,000 

per individual in any one tax year. A husband 

and wife can each invest up to £100,000 in any 

one tax year. The subscription list for the Offer 

will open at 10.00 a.m. on 2 October 2001. The 

Offer will close at 5.00 p.m. on 14 December 

2001, unless previously extended by the 

Directors, or when it is fully subscribed, if 

earlier. 

Application has been made to the UK Listing 

Authority for the Shares to be admitted to the 

Official List. The Shares will be issued in 

registered form, be transferable and rank for all 


dividends and other distributions hereafter 

declared, paid or made by the Company. It is 

anticipated that dealings in the Shares issued 

pursuant to the Offer will commence on 25 

January 2002. Share certificates and certificates 

to enable a claim for income tax relief to be 

made in respect of Shares subscribed for under 

the Offer will be posted to Shareholders within 

one month of the relevant Share issue. Prior to 

despatch of definitive share certificates, transfers 

(if any) will be certified against the register. No 

temporary documents of title will be issued. 

Assuming the minimum subscription level of £1 

million has been achieved, Shares will be 

allotted and issued in respect of valid 

applications received for the Offer on 15 

October 2001, on 14 December 2001 and on any 

other dates on which the Directors decide. Save 

for the dates referred to above, the Company 

cannot guarantee to issue shares on any 

particular date. The Directors may at their 

discretion extend the period for the acceptance 

of the Offer to a date to be agreed in the 

2002/2003 tax year. 

Subject to demand from Investors, the Directors 

may use their power, under the Articles, to allot 

further Shares, up to 10% of the allotted and 

listed share capital. Should the Directors decide 

to allot any such further Shares, no further 

listing particulars will be published and the 

Application Form will be used for such 

allotments. Application will be made for any 

such further Shares to be admitted to the Official 

List within four weeks of the final share 

allotment. 

Launch Costs and Commission 

Downing will be paid an initial capital raising 

fee of 5% of the gross proceeds of the Offer 

(i.e. 5p per Share), together with an annual 

commission of 0.25% per annum of the net 

assets of the Company for up to 10 years. 

Downing will be responsible for paying all the 

costs of the Offer including commissions, 

payable to authorised financial advisers on 

successful applications bearing their stamp, and 

listing expenses. Authorised financial advisers 

will be paid, by Downing out of its capital 

raising fees, an initial commission usually of 

2.5% of the gross amount subscribed for Shares 

allotted under the Offer, in respect of all 

applications accepted which bear the stamp of 

the relevant authorised financial adviser, and, 

provided they continue to act for their client and 

their client continues to hold Shares, an annual 

trail commission usually of 0.25% of the net 

assets of the Company on such applications for 

up to 10 years. This annual trail commission 

will first be paid in December 2002 in respect of 

the financial period ending 30 September 2002 

and annually thereafter. Authorised financial 

advisers may agree to waive part or all of their 

initial commission. In such circumstances, an 

Investor’s application will attract an additional 

allotment of Shares at no greater cost to the 

Company or the Investor and the commission 

waived will be used to satisfy the purchase price 

of such Shares. As the initial costs of the Offer 

are fixed at 5% of the gross proceeds, the net 

proceeds of the Offer will be 95p per Share and 

£23,750,000 at the maximum subscription. 

FINANCIAL CALENDAR 

Financial year end 

Preliminary results announcement and posting of annual report (from 2002) 

Annual general meeting (from 2003) 

Final dividend (from 2003) 

Interim results announcement and posting of interim report (from 2002) 

30 September 

December 

January 

February 

June 

Additional information concerning the Company is set out in Part III of the Prospectus. 


PART II 

TAXATION 

VCTs: Summary of the Applicable Legislation 

1. Approval 

To obtain VCT status a company must be approved by 

the Inland Revenue as a VCT. The Inland Revenue has 

agreed to grant the Company provisional approval under 

Section 842AA of ICTA as a VCT, effective from the 

first day on which Shares are issued pursuant to the Offer. 

Full unconditional approval should follow pending 

satisfaction of the conditions set out below. Tax reliefs 

are available during the provisional approval period 

provided that full unconditional approval is ultimately 

granted. 

To obtain full unconditional approval, the conditions 

summarised below have to be satisfied in relation to the 

accounting period of the company which is current when 

the application for approval is made, or in any event must 

be satisfied by no later than the beginning of the VCT’s 

next accounting period and must continue to be satisfied 

throughout the life of the VCT: 

(i) 

(ii) 

(iii) 

(iv) 

the VCT’s income must have been derived wholly 

or mainly from shares and securities; 

no holding in a company (other than a VCT or a 

company which would, if its shares were listed, 

qualify as a VCT) by the VCT may represent more 

than 15%, by value, of the VCT’s total investments 

at the time of investment; 

the VCT must not have retained more than 15% of 

the income derived from shares or securities in any 

accounting period; and 

the VCT must not be a close company. 

The company’s ordinary share capital must be quoted on 

the London Stock Exchange by no later than the 

beginning of the accounting period following that in 

which the application for approval is made. 

The following conditions also have to be satisfied by no 

later than the beginning of the VCT’s accounting period 

which commences no more than three years after 

provisional approval takes effect and must continue to be 

satisfied throughout the life of the VCT: 

(i) 

(ii) 

(iii) 

at least 70%, by value, of its investments is 

represented by shares or securities comprising 

qualifying investments; 

at least 30%, by value, of its qualifying 

investments is represented by holdings of ordinary 

shares which carry no present or future 

preferential rights to dividends, return of capital or 

any redemption rights; and 

at least 10% of its total investment in any 

qualifying company is held in ordinary, nonpreferential 

shares. 

"Qualifying investments" comprise shares or securities 

(including loans with a five year or greater maturity 

period but excluding guaranteed loans and securities) 

issued by unquoted trading companies which exist wholly 

or mainly for the purpose of carrying on one or more 

qualifying trades. The definition of a qualifying trade 

excludes dealing in property, shares, securities, 

commodities or futures. It also excludes banking, 

insurance, receiving certain royalties or licence fees, 

leasing, the provision of legal and accounting services, 

farming and market gardening, forestry and timber 

production, property development and operating or 

managing hotels, guest houses, nursing and residential 

care homes. Qualifying investments are limited to 

investments of up to £1 million per investee company in 

any one tax year or in any six month period straddling 

two tax years. A qualifying investment can also be made 

in a company which is a parent company of a trading 

group where the activities of the group, taken as a whole, 

consist of carrying on one or more qualifying trades, one 

of which is carried on wholly or mainly in the United 

Kingdom. The investee company’s gross assets must not 

exceed £15 million immediately prior to the investment 

and £16 million immediately thereafter. Neither the VCT 

nor any other company may control the investee 

company. 

Companies whose shares are traded on AIM and OFEX 

are treated as unquoted companies for the purposes of 

calculating qualifying investments. Shares in an unquoted 

company which subsequently become listed may still be 

regarded as a qualifying investment for a further five 

years following listing, provided all other conditions are 

met. 

2. Taxation of a VCT 

VCTs are exempt from corporation tax on chargeable 

gains. There is no restriction on the distribution of 

realised capital gains by a VCT, subject to the 

requirements of company law. The Company will be 

subject to corporation tax on its income (excluding 

dividends received from UK companies) after deduction 

of attributable expenses. 

3. Tax reliefs for individual investors resident in the UK 

Individuals who subscribe for new ordinary shares must 

be aged 18 or over to qualify for the tax reliefs outlined 

below. 

Relief from income tax 

An investor subscribing up to £100,000 in any tax year 

for new ordinary shares in a VCT will be entitled to claim 

income tax relief on the investment, in the year in which 

the investment is made, at the rate of 20%, although this 

relief will be withdrawn if either the shares are sold 

within three years or an investor takes out a loan which 

would not have been made, or would not have been made 

on the same terms, save for the acquisition of such shares. 

Relief is restricted to the amount, which reduces the 

investor’s income tax liability to nil. Lower or basic rate 

taxpaying investors, whose only source of income is 

dividend income, will no longer be able to claim income 

tax relief as tax credits on dividends are now notional and 

cannot be paid. 

An investor who subscribes for or acquires ordinary 

shares in a VCT will not be liable for UK income tax on 

dividends paid by the VCT in respect of investments up 

to a maximum of £100,000 in any one tax year. 

Relief from capital gains tax 

A disposal by an investor of ordinary shares in a VCT 

(whether acquired by subscription for new shares or by 

subsequent acquisition) will give rise to neither a 

chargeable gain nor an allowable loss for the purposes of 

UK capital gains tax. This relief is limited to disposals of 

ordinary shares acquired within the limit of £100,000 for 

any tax year. 


An investor, who is resident and ordinarily resident in the 

UK and subscribes for new ordinary shares in a VCT and 

who in respect of which obtains income tax relief, may 

make a claim to defer chargeable gains realised within the 

period beginning twelve months before his subscription 

and ending twelve months after his subscription (i.e. an 

investor must have taxable income (including dividend 

income) above personal allowances). The amount of the 

gain, which can be deferred, is limited to the amount 

subscribed for ordinary shares up to £100,000 in any tax 

year. 

Investors should note that the prior gain is only deferred 

and the subsequent disposal of the ordinary shares in a 

VCT, whether at a profit or a loss, will nevertheless result 

in the earlier gain being taxed in full at the then 

prevailing rate of capital gains tax. Any loss realised on 

shares in a VCT on which relief has been obtained will 

not be allowed against any chargeable gains realised by 

the investor. 

Loss of tax reliefs 

(i) 

If a company never obtains full approval as a VCT, 

it will be treated as if it was never entitled to 

exemption from corporation tax on chargeable gains 

and therefore all chargeable gains it has realised will 

be subject to corporation tax. 

(ii) For investors, the withdrawal of VCT status may 

(depending upon the timing of such withdrawal) 

result in: 

• repayment of the 20% income tax relief on 

subscription for new VCT shares; 

• crystallisation, at the time of such withdrawal, 

of any capital gain deferred by investors on 

subscription for new VCT shares; 

• income tax becoming payable on subsequent 

payments of dividends by the company; and 

• a liability to tax on capital gains being suffered 

in the normal way on the disposal of shares in 

the company, except that any part of the gain 

attributable to the period for which the VCT 

was approved would be exempt. 

(iii) The consequences for investors in a company, which 

never obtains full unconditional approval as a VCT, 

are as follows: 

• any capital gain for which deferral had been 

obtained by an investor would be treated as if it 

had not been deferred and interest on overdue 

tax may arise; 

• repayment of the 20% income tax relief on 

subscriptions for new VCT shares and interest 

on overdue tax may arise; and 

• any gain arising on a disposal of the shares 

would be liable to capital gains tax and losses 

on the shares would be allowable losses for 

capital gains tax purposes. 

4. Consequences of an investor dying or a transfer of 

shares between spouses 

(i) Initial income tax and deferral of capital gains tax 

reliefs 

If an investor dies within three years of making an 

investment in a VCT, the transfer of shares on death 

is not treated as a disposal and, therefore, the initial 

income tax relief is not withdrawn. In addition, any 

deferred capital gains tax does not become 

chargeable on death. However, the shares will 

become part of the deceased’s estate for inheritance 

tax purposes. The executors of the estate are free to 

deal with the VCT shares in any way they see fit. 

(ii) Tax implications for the beneficiary 

Provided a number of conditions are met, the 

beneficiary of any VCT shares will be entitled to 

tax-free dividends and will not pay capital gains tax 

on any disposal, but will not be entitled to any initial 

income tax relief or deferral of capital gains tax. 

(iii) Transfers of shares between spouses 

Transfers of shares in a VCT between spouses are 

not deemed to be a disposal and therefore all tax 

reliefs will be retained. 

5. General 

(i) 

Investors who are not resident in the UK 

Non-resident investors, or investors who may 

become non-resident, 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. 

(ii) Stamp duty and stamp duty reserve tax 

No stamp duty or (unless shares in a VCT are issued 

to a nominee for a clearing system or a provider of 

depository receipts) stamp duty reserve tax will be 

payable on the issue of such shares. The transfer on 

the sale of shares would normally be subject to ad 

valorem stamp duty or (if an unconditional 

agreement to transfer such shares is not completed 

by a duly stamped transfer within two months) 

stamp duty reserve tax generally, in each case at the 

rate of 50p for every £100 or part of £100 of the 

consideration paid. Such duties would be payable by 

a person who purchases such shares from the 

original subscriber. 

(iii) Purchases in the market after listing 

Any subsequent purchaser of existing Shares, as 

opposed to a subscriber for new Shares, will not 

qualify for income tax relief on investment or for 

capital gains tax deferral relief. 

The above is only a summary of the law concerning the tax position of VCTs and Investors in VCTs and is based on the 

understanding of current law and practice in relation to VCTs. Potential Investors are recommended to consult a professional 

adviser as to the taxation consequences of their investing in a VCT. 


PART III 

TERMS AND CONDITIONS OF APPLICATION 

1. In these Terms and Conditions of Application, the expression 

“Prospectus” means the document constituting the prospectus 

which comprises listing particulars of the Company dated 2 

October 2001. The expression “Mini Prospectus” means the 

document dated 2 October 2001 and entitled Mini Prospectus 

issued in conjunction with the Offer and the expression 

“Application Form” means the application form for use in 

accordance with these Terms and Conditions of Application. 

Save where the content requires otherwise, the terms used in 

the Application Form bear the same meaning as in the 

Prospectus. 

2. The right is reserved to reject any application or to accept any 

application in part only. 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 

Shares than the number applied for, 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 in a 

separate account with Bank of Scotland. 

3. You may pay for your application for Shares by cheque or 

bankers’ draft submitted with the Application Form. The 

Board may reserve shares for issue to certain persons as set 

out in “Other Information” in Part I of this document. 

4. By completing and delivering an Application Form, you: 

(a) offer to subscribe for the number of Shares specified on your 

Application Form or any smaller number for which such 

application is accepted at 100p per Share subject to the 

Prospectus, these Terms and Conditions of Application and 

the Memorandum and Articles of Association of the 

Company; 

(b) authorise your financial adviser or whoever he or she may 

direct, Northern Registrars Limited or the Company to send a 

document of title for the number of Shares for which your 

application is accepted, and/or a crossed cheque for any 

monies returnable, by post at your risk to your address as set 

out on your Application Form; 

(c) in consideration of the Company agreeing that it will not, 

prior to the Offer closing, offer any Shares for subscription to 

any persons other than as set out in the Prospectus, agree that 

your application may not be revoked and that this paragraph 

constitutes a collateral contract which will become binding 

upon despatch by post or delivery of your Application Form 

duly completed to the Company or to your financial adviser; 

(d) warrant that your remittance will be honoured on first 

presentation and agree that, if such remittance is not so 

honoured, you will not be entitled to receive a share 

certificate for the Shares applied for or to enjoy or receive 

any rights or distributions in respect of such Shares unless 

and until you make payment in cleared funds for such 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 Shares, the Company may (without prejudice to its 

other rights) treat the agreement to allot such Shares as void 

and may allot such Shares to some other person, in which 

case you will not be entitled to any refund or payment in 

respect of such Shares (other than return of such late 

payment); 

(e) agree that all cheques and bankers’ drafts may be presented 

for payment on the due dates and any definitive document of 

title and any monies returnable to you may be retained 

pending clearance of your remittance and the completion of 

any verification of identity required by the Money 

Laundering Regulations 1993 (“the Regulations”) and that 

such monies will not bear interest; 

(f) undertake to provide satisfactory evidence of identity within 

such reasonable time (in each case to be determined in the 

absolute discretion of the Company and the Sponsor) to 

ensure compliance with the Regulations; 

(g) agree that, in respect of those Shares for which your 

application has been received and processed and not rejected, 

acceptance of your application shall be constituted by the 

Company instructing Northern Registrars Limited 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 to 

you at your address as set out in the Application Form; 

(i) agree that, having had the opportunity to read the Prospectus, 

you shall be deemed to have had notice of all information and 

(j) 

representations contained therein; 

confirm that (save for advice received from your financial 

adviser) in making such application you are not relying on 

any information and representation other than those 

contained in the Prospectus and you accordingly agree that 

no person responsible solely or jointly for the Prospectus will 

have any liability for any such other information or 

representation; 

(k) agree that all applications, acceptances of applications and 

contracts resulting therefrom under the Offer shall 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 proceedings arising out of or in 

connection with any such applications, acceptance and 

contracts in any other manner permitted by law or in any 

court of competent jurisdiction; 

(l) authorise the Company, Northern Registrars Limited or 

Downing or any other person authorised by them, as your 

agent, to do all things necessary to effect registration of any 

Shares subscribed by you into your name and authorise any 

representatives of the Company, Northern Registrars Limited 

or Downing to execute any document required therefor and to 

enter your name on the register of members of the Company; 

(m) agree to provide the Company with any information which it 

may request in connection with your application or to comply 

with the VCT regulations or other relevant legislation (as the 

same may be amended from time to time); 

(n) warrant that, in connection with your application, you have 

observed the laws of all requisite 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, Downing or the Sponsor acting in 

breach of the regulatory or legal requirements of any territory 

in connection with the Offer or your application; 

(o) confirm that you have read and complied with paragraph 6 

below; 

(p) 

(q) 

(r) 

confirm that you have reviewed the restrictions contained in 

paragraph 7 below; 

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

if the laws of any territory or jurisdiction outside the United 

Kingdom are applicable to your application, warrant that you 

have complied with all such laws and none of the Company, 

Downing or the Sponsor or any of their respective agents will 

infringe any laws of any such territory or jurisdiction directly 

or indirectly as a result or in consequence of any acceptance 

of your application; 

(s) agree that your Application Form is addressed to the 

Company and to the Sponsor; 

(t) agree that Downing and the Sponsor are acting for the 

Company in connection with the Offer and for no-one else 

and that they will not treat you as their customer by virtue of 

such application being accepted or owe you any duties 

concerning the price of Shares or concerning the suitability of 

Shares; 


(u) 

(v) 

(w) 

(x) 

(y) 

(z) 

warrant that if you sign the Application Form on behalf of 

somebody else or yourself and another or others jointly or a 

corporation you have the requisite power to make such 

investments as well as the authority to do so and such person 

will also be bound accordingly and will be deemed also to 

have given the confirmations, warranties and undertakings 

contained in these terms and conditions of application and 

undertake (save in the case of signature by an authorised 

financial adviser on behalf of an Investor) to enclose a power 

of attorney or a copy thereof duly certified by a solicitor with 

the Application Form; 

warrant that you are not subscribing for the Shares using a 

loan which would not have been given to you, or not given to 

you on such favourable terms, if you had not been proposing 

to subscribe for the Shares; 

warrant that the Shares are allotted to you for bona fide 

investment 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. Obtaining tax 

reliefs given under the VCT legislation contained in the 

Finance Act 1995 is not of itself tax avoidance; 

warrant that you are not a US person or resident of Canada 

and that you are not applying on behalf of or with a view to 

the Offer, sale or delivery, directly or indirectly, to or for the 

benefit of any US person or resident of Canada; 

warrant that the information contained in the Application 

Form is accurate; and 

agree that if you request that shares are issued to you on a 

date other than 15 October 2001 or 14 December 2001 and 

such shares are not issued on such date that the Company and 

its agents and Directors will have no liability to you arising 

from the issue of such shares on a different date. 

5. No person receiving a copy of the Prospectus, the Mini 

Prospectus or an Application Form in any territory other than 

the United Kingdom may treat the same as constituting an 

invitation or offer to him or her, nor should he or she in any 

event use such Application Form unless, in the relevant 

territory, such an invitation or offer could lawfully be made 

to him or her 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 United Kingdom wishing to make an application 

thereunder to satisfy himself or herself as to the full 

/observance of the laws of any relevant territory in 

connection therewith, including obtaining any requisite 

governmental or other consents, observing any of the 

formalities requiring to be observed in such territory and 

paying any issue, transfer or other taxes required to be paid in 

such territory. 

6. The Shares have not been and will not be registered under the 

United States Securities Act 1933, as amended, or under the 

securities laws of any state or other political subdivision of 

the United States, and may not be Offered or sold in the 

United States of America, its territories or possessions or 

other areas subject to its jurisdiction (the “USA”). In 

addition, the Company has not been and will not be 

registered under the United States Investment Company Act 

of 1940, as amended. No application will be accepted if it 

bears an address in the USA. 

7. This application is addressed to the Company and the 

Sponsor. The rights and remedies of the Company and the 

Sponsor under these Terms and Conditions of Application are 

in addition to any rights and remedies which would otherwise 

be available to either of them, and the exercise or partial 

exercise of one will not prevent the exercise of others. 

8. The dates and times referred to in these Terms and 

Conditions of Application may be altered by the Company 

with the agreement of the Sponsor. 

9. Authorised financial advisers who, acting on behalf of their 

clients, return valid Application Forms bearing their stamp 

and SIB, SRO or RPB number (or from the beginning of 

December, their FSA number, as appropriate) will be entitled 

to commission on the amount payable in respect of the Shares 

allocated for each such Application Form at the rates 

specified in the paragraph headed "Launch Costs and 

Commission" in Part I of this document. Authorised 

financial advisers may agree to waive part or all of their 

initial commission in respect of an application. If this is the 

case, then such application will be treated as an application to 

apply for the number of Shares stated in box number 2 of the 

Application Form together with a number of additional 

Shares equivalent to the amount of commission waived at 

£1.00 per Share, which waived commission will be applied in 

paying for such Shares. Downing or Northern Registrars 

Limited is authorised to amend such box number 2 to include 

any such additional Shares. Financial advisers should keep a 

record of Application Forms submitted bearing their stamp to 

substantiate any claim for their commission. 

10. The section headed Notes on Application Form forms part of 

these Terms and Conditions of Application. 

11. It is a condition of the Offer to ensure compliance with the 

Money Laundering Regulations 1993. Downing is therefore 

entitled to require, at its absolute discretion, verification of 

identity from any Applicant including, without limitation, any 

person who either (i) tenders payment by way of a cheque or 

banker’s draft drawn on an account in the name of a person 

or persons other than the Applicant or (ii) appears to 

Downing to be acting on behalf of some other person. 

Pending the provision of evidence satisfactory to Downing as 

to the identity of the Applicant and/or any person on whose 

behalf the Applicant appears to be acting, Downing may, in 

its absolute discretion, retain an Application Form lodged by 

an Applicant and/or the cheque or other remittance relating 

thereto and/or Northern Registrars Limited may not enter the 

Applicant on the register of members or issue any share 

certificates in respect of such application. If verification of 

identity is required, this may result in delay in dealing with 

an application and in rejection of the application. The 

Company reserves the right, in its absolute discretion, for it 

or Downing to reject any application in respect of which 

Downing considers that, having requested verification of 

identity, it has not received evidence of such identity 

satisfactory to it by such time as was specified in the request 

for verification of identity or in any event within a reasonable 

period. In the event of an application being rejected in any 

such circumstances, the Company reserves the right in its 

absolute discretion, but shall have no obligation, to terminate 

any contract of allotment relating to or constituted by such 

Application Form (in which event the money payable or paid 

in respect of the application will be returned (without 

interest) to the account of the drawee bank from which such 

sums were originally debited) and/or to endeavour to procure 

other subscribers for the Shares in question (but in each case 

without prejudice to any rights the Company may have to 

take proceedings to recover in respect of loss or damage 

suffered or incurred by it as a result of the failure to produce 

satisfactory evidence as aforesaid). The submission of an 

Application Form will constitute an undertaking by the 

Applicant to provide promptly to Downing such information 

as may be specified by it as being required for the purpose of 

the Money Laundering Regulations 1993. 

12. The right is also reserved to treat as valid any application not 

complying fully with these Terms and Conditions of 

Application for the Offer or not in all respects complying 

with the Notes on Application Form. In particular, but 

without limitation, the Company may accept applications 

made otherwise than by completion of an Application Form 

where the Applicant has agreed in some other manner 

acceptable to the Company to apply in accordance with these 

Terms and Conditions of Application. 


Please pin or staple 

your cheque here 

1 


APPLICATION FORM 

Reservation Number 

(if applicable) 

Make your cheque or bankers’ draft out to “Bank of Scotland - A/C Electra VCT” and crossed “A/C Payee only” and return this 

form as soon as possible to Downing Corporate Finance Limited, 69 Eccleston Square, London SW1V 1PJ. 

Title and Name in Full 

Permanent address 

Postcode 

Daytime Tel 

E-Mail Address 

Date of Birth / /19 

day/month/year 

National Insurance No. 

2 

I am applying for 

(income tax year 2001/2002) 

of 1p each or such lesser number of Shares for which this application may be accepted in the event of over subscription in respect of 

the Offer on the terms and conditions set out in Part IV of the Prospectus dated 2 October 2001. Please send me a certificate(s) 

confirming my entitlement to venture capital trust tax reliefs. 

The total amount I am paying for the Shares is 

(at £1.00 per Share) 

£ 

3 

For Official Use Only 

Date on which Shares are Issued Share Register Number 

Amount paid for Shares Issued (£) 

Amount paid per Share (£) 

Number of Shares Issued 

Amount of Commission 

waived (where applicable) (£) 

Shares 

Min 5,000 

Max 100,000 

If this form is completed and signed by the investor named in Box 1 

BY SIGNING THIS FORM I HEREBY DECLARE THAT: (i) I have received the Prospectus or Mini Prospectus dated 2 

October 2001 and have read the terms and conditions of application therein; (ii) I will be the beneficial owner of the Shares in 

Electra Kingsway VCT Plc issued to me pursuant to the Offer; and (iii) to the best of my knowledge and belief, the particulars I 

have given to Electra Kingsway VCT Plc are correct. 

If this form is completed and signed by an independent financial adviser 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 (iii) above. 

The Inland Revenue may inspect this application form. It is a serious offence to make a false declaration. Investors 

should note that the maximum investment, on which tax reliefs on investments in VCTs are available, is £100,000 per tax 

year. 

4 

Signature Date / / 

YOU MUST COMPLETE ALL WHITE BOXES ABOVE 

Authorised financial advisers should stamp and complete this box. 

Firm Name 

Contact Name 

SRO/RPB Registration No 

Due completion of the agent’s box indicates that the agent is duly authorised to 

transact investments of this type under the Financial Services Act 1986 and 

confirms that the requirements of the Money Laundering Regulations 1993 have 

been complied with. Authorised financial advisers will be paid, by Downing, an 

initial commission usually of 2.5% of the funds invested through them, and an 

annual trail commission (until the earliest of 10 years or the Management and 

Administration Deed being terminated or the total trail commission payable 

equals 7.5% of the proceeds of the Offer) usually of 0.25% per annum in respect 

of Investors whose successful applications were submitted through them and 

who continue to hold the Shares which they acquired under the Offer. The trail 

commission will be calculated by reference to the net asset value of Shares held 

at each year on 30 September, commencing 30 September 2002. 

Address 

Postcode 

Tel 

Fax 


✂

NOTES ON APPLICATION FORM 

Please send the completed Application Form, together with your cheque or bankers’ draft by post, or deliver 

it by hand, to Downing Corporate Finance Limited, 69 Eccleston Square, London SW1V 1PJ. If you have any 

questions on how to complete the Application Form please contact Downing Corporate Finance Limited on 

020 7411 4700 or your financial adviser. It is essential that you complete all parts of the Application Form in 

accordance with the instructions in these notes. 

1 

2 

3 

Insert your full name, permanent address, daytime telephone number, e-mail address, date of birth and 

National Insurance Number in Box 1. Joint applications are not permitted. 

Insert the number of Shares you are applying for in the 2001/2002 tax year in Box 2. 

Insert (in figures) in Box 3 the total amount you are paying. This is the same number as in Box 2 above. 

Please note that the minimum investment is £5,000. The maximum investment, on which tax reliefs on 

investments in VCTs are available, is £100,000 per tax year. 

Attach your cheque or bankers’ draft to the Application Form for the exact amount shown in Box 3. Your 

cheque or bankers’ draft must be made payable to "Bank of Scotland – A/C Electra VCT" and crossed 

"A/C Payee only". Your payment must relate solely to this application. No receipt will be issued. 

Your cheque or bankers’ draft must be drawn in sterling on an account at a branch (which must be in the 

United Kingdom, the Channel Islands or the Isle of Man) of a bank which is either a member of the Cheque 

and Credit Clearing Company Limited or the CHAPS Clearing Company Limited, a member of the Scottish 

Clearing Banks Committee or the Belfast Clearing Committee or which has arranged for its cheques or 

bankers’ drafts to be cleared through facilities provided for members of any of those companies or 

associations and must bear the appropriate sorting code in the top right hand corner. The right is reserved to 

reject any Application Form in respect of which the cheque or bankers’ draft has not been cleared on first 

presentation. Any monies returned will be sent by cheque crossed "A/C Payee only" in favour of the 

Applicant. 

Money Laundering Regulations 1993 - Important note for applications of £8,000 or more 

If the value of the Shares applied for is £8,000 or more, payment should be made by means of a cheque 

drawn on an account in the name of the Applicant. If this is not practicable and you use a cheque drawn by a 

third party or a building society cheque or bankers’ draft, you should write the name, address and date of 

birth of the Applicant on the back of the cheque or bankers’ draft and: 

(a) if a building society cheque or bankers’ draft is used, the building society or bank must also endorse on 

the cheque or draft the name and account number of the person whose account is being debited; or 

(b) if a cheque is drawn by a third party, you must ensure that one of the following documents is enclosed 

with the form: a copy of your passport or driving licence (certified by a solicitor or bank) or a recent 

original bank or building society statement or utility bill in your name. Original documents will be 

returned by post at your risk. 

4 

Read the declaration and sign and date the Application Form in Box 4. If someone other than the 

investor named in Box 1 signs on such investor’s behalf, such signatory must ensure that the declaration 

given on behalf of such investor is correct. 

Agents who are entitled to receive commission should stamp and complete the agent’s box, giving their full 

name and address, telephone number and details of their authorisation under the Financial Services Act 1986 

(or any succeeding legislation). The right is reserved to withhold payment of commission if Electra 

Kingsway VCT Plc is not, in its sole discretion, satisfied that the agent is so authorised.

Please pin or staple 

your cheque here 

1 


APPLICATION FORM 

Reservation Number 

(if applicable) 

Make your cheque or bankers’ draft out to “Bank of Scotland - A/C Electra VCT” and crossed “A/C Payee only” and return this 

form as soon as possible to Downing Corporate Finance Limited, 69 Eccleston Square, London SW1V 1PJ. 

Title and Name in Full 

Permanent address 

Postcode 

Daytime Tel 


Date of Birth / /19 

day/month/year 

National Insurance No. 

2 

I am applying for 

(income tax year 2001/2002) 

of 1p each or such lesser number of Shares for which this application may be accepted in the event of over subscription in respect of 

the Offer on the terms and conditions set out in Part IV of the Prospectus dated 2 October 2001. Please send me a certificate(s) 

confirming my entitlement to venture capital trust tax reliefs. 

The total amount I am paying for the Shares is 

(at £1.00 per Share) 

£ 

3 

For Official Use Only 

Date on which Shares are Issued Share Register Number 

Amount paid for Shares Issued (£) 

Amount paid per Share (£) 

Number of Shares Issued 

Amount of Commission 

waived (where applicable) (£) 

Shares 

Min 5,000 

Max 100,000 

If this form is completed and signed by the investor named in Box 1 

BY SIGNING THIS FORM I HEREBY DECLARE THAT: (i) I have received the Prospectus or Mini Prospectus dated 2 

October 2001 and have read the terms and conditions of application therein; (ii) I will be the beneficial owner of the Shares in 

Electra Kingsway VCT Plc issued to me pursuant to the Offer; and (iii) to the best of my knowledge and belief, the particulars I 

have given to Electra Kingsway VCT Plc are correct. 

If this form is completed and signed by an independent financial adviser 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 (iii) above. 

The Inland Revenue may inspect this application form. It is a serious offence to make a false declaration. Investors 

should note that the maximum investment, on which tax reliefs on investments in VCTs are available, is £100,000 per tax 

year. 

4 

Signature Date / / 

YOU MUST COMPLETE ALL WHITE BOXES ABOVE 

Authorised financial advisers should stamp and complete this box. 

Firm Name 

Contact Name 

SRO/RPB Registration No 

Due completion of the agent’s box indicates that the agent is duly authorised to 

transact investments of this type under the Financial Services Act 1986 and 

confirms that the requirements of the Money Laundering Regulations 1993 have 

been complied with. Authorised financial advisers will be paid, by Downing, an 

initial commission usually of 2.5% of the funds invested through them, and an 

annual trail commission (until the earliest of 10 years or the Management and 

Administration Deed being terminated or the total trail commission payable 

equals 7.5% of the proceeds of the Offer) usually of 0.25% per annum in respect 

of Investors whose successful applications were submitted through them and 

who continue to hold the Shares which they acquired under the Offer. The trail 

commission will be calculated by reference to the net asset value of Shares held 

at each year on 30 September, commencing 30 September 2002. 

Address 

Postcode 

Tel 

Fax 


✂

Electra Kingsway VCT Offer for Subscription - The Tax Shelter Report

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