Foresight Solar EIS Fund

Transcription

1 Targeting capital growth from solar power oresight olar IS Fund Information Memorandum with Application Form

2 Foresight Solar VCT Plc oresight olar IS Fund Information Memorandum with Application Form

3 Important notice This Information Memorandum is issued and approved by Foresight Group LLP ( Foresight ), an authorised person within the meaning of the Financial Services and Markets Act 2000 (FSA number: ) whose registered office is at ECA Court South Park, Sevenoaks, Kent TN13 1DU. Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested. The Fund is only open for participation by prospective investors who can be categorised by Foresight as a professional client under the rules of the Financial Services Authority ( FSA ); that is to say, someone in respect of whom Foresight undertakes an adequate assessment of his or her expertise, experience and knowledge which gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the prospective investor is capable of making his or her own investment decisions and understands the risks involved; someone to whom Foresight has given a clear warning of the protections and investor compensation rights which the potential investor may lose; and someone who has stated in writing, in a separate document from the Investor s Agreement in Appendix 2 to this Information Memorandum, that he or she is aware of the consequences of losing such protections. Further information explaining how this categorisation can be effected, what it means, and the consequences thereof, is set out in the Investor s Agreement in Appendix 2 to this Information Memorandum. Please note that applications may only be made, and will only be accepted, subject to the terms and conditions of this Information Memorandum. The attention of prospective investors is drawn to the fact that amounts invested in the Fund will be committed to investments which may be of a long term and illiquid nature. Neither the Fund nor the companies in which it invests will be quoted on any recognised or designated investment exchange and, accordingly, there will not be an established or ready market for participation in the Fund nor the underlying investments. An investment in the Fund will therefore not be easily realisable. The protections offered by the FSA to retail clients do not apply to the Fund and compensation under the UK Investor Compensation Scheme will not be available. This Information Memorandum does not constitute an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorised or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation. It is the responsibility of each recipient (including those located outside the UK) to satisfy himself or herself as to full compliance with the applicable laws and regulations of any relevant territory in connection with any application to participate in the Fund, including obtaining any requisite governmental or other consent and observing any other formality presented in such territory. Prospective investors should not regard the contents of this Information Memorandum as constituting advice relating to legal, taxation or investment matters and are advised to consult their own professional advisers before contemplating any investment or transaction. The information contained in this Information Memorandum makes reference to the current laws concerning EIS relief, IHT relief and CGT deferral. These levels and bases of relief may be subject to change. The tax reliefs referred to in this Information Memorandum are those currently available and their value depends on individual circumstances. Past performance is not necessarily a guide to future performance and may not necessarily be repeated. You should be aware that share values and income from them may go down as well as up and you may not get back the amount you originally invested. This Information Memorandum does not constitute, and should not be considered as, an offer to buy or sell or solicitation of an offer to buy or sell any security or share. It does not constitute a public offering in the United Kingdom. Foresight has taken all reasonable care to ensure that all the facts stated in this Information Memorandum are true and accurate in all material respects and that there are no other material facts, or opinions, which have been omitted, which would make any part of this promotion misleading. This Information Memorandum constitutes a financial promotion pursuant to section 21 of the Financial Services and Markets Act Further Information If you require any further information relating to the Fund please contact Mike Currie at Foresight by telephone on or by to sales@foresightgroup.eu

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5 Contents Page Letter of Introduction 4 Expected Timetable, statistics and Costs 5 Enterprise Investment Scheme Tax Reliefs 6 Investment Opportunity 7 Fund Manager 7 Investment Strategy 9 Dealflow 9 ReturnS 9 Accumulator Option 10 Individual Roll-Over Option 10 LiquiditY 10 CharGES 11 Fund Structure 11 How to Invest 11 Introduction to Solar Power Investing 12 Investment Team 18 DirectorY 21 Risk Factors 22 Appendix 1: Taxation 27 Appendix 2: Investor s Agreement 30 Appendix 3: Glossary of Terms 40 Application Forms, Adviser s Certificate and Schedule 42 Since its establishment in 1984, Foresight has built a reputation for creating innovative and successful investment products that meet the needs of private investors. We now have over 12,000 investors and funds under management of over 200 million.

6 Letter of Introduction March 2011 Dear Investor The economics of generating solar electricity in the UK were transformed in 2010 by the introduction of governmentregulated Feed-in Tariffs which effectively guarantee 25-year inflation-linked prices for electricity generated by qualifying solar power systems (the FIT Scheme ). Similar measures introduced previously in countries such as Germany, Spain and Italy have attracted great interest among private investors and demand for the Foresight Solar VCT, launched in 2010, has surpassed our expectations. We are now launching the to give investors access to our strong flow of solar power investment opportunities with the added tax benefits of the Enterprise Investment Scheme. and your investment should be outside the scope of Inheritance Tax after two years. The EIS benefits are available on subscriptions of up to 500,000 per individual in any one tax year. Further details of the tax benefits are described on page 6. I hope that you find this Information Memorandum clear and easy to understand. You can call us on for more detail at any time. We always recommend that you seek independent professional advice before you invest in any product. When you are ready to invest, you will find the Application Forms from page 42 onwards. Bernard Fairman Chairman Since establishing our solar power team in 2007, we have invested in solar power projects with a total transaction value of more than 150 million and forecast generating capacity of 29 megawatts. I believe that this in-house experience of sourcing opportunities, arranging bank finance and completing solar power investments sets Foresight apart from any other EIS fund manager. Feed-in Tariffs amount, in effect, to a government guarantee of long-term prices. In the UK alone, these incentives are expected to be worth over 3 billion to the renewable electricity industry in the period to Foresight Solar EIS Fund aims to enable individuals to be part of that industry and to benefit from the predictable revenue streams possible from Feed-in Tariffs, which in the UK are inflation-adjusted in line with the retail prices index. In February 2011 the Government announced a review of the FIT regime, and this has led some people to question the solar investment opportunity. I am convinced that the opportunity remains attractive and I believe that the Fund will benefit from having less competition as potential new entrants to our market delay their plans. You will find more information on the FIT review on page 17. The Enterprise Investment Scheme is one of a very small number of tax-efficient investment schemes officially sanctioned by HM Revenue and Customs. Subject to your personal circumstances, you should be able to reclaim 20% of your initial investment into the Fund against your tax bill 04

7 EXPECTED TIMETABLE, Statistics AND COSTS Fund Name Fund Structure Target Size Sector Focus Fund Manager Target Portfolio Size Unapproved EIS Fund 20 million Unquoted companies which derive their revenues from generating solar electricity, primarily in the UK Foresight companies with assets capable of generating 30 megawatts of electricity Investment Period Up to 31 March 2012* Minimum Investment 10,000 Closing Date 30 June 2011 ** *Foresight may extend the investment period by up to 12 months if the Fund is not fully invested by 31 March 2012 **Foresight may accept applications after the Closing Date 05

8 Enterprise Investment Scheme Tax Reliefs The following summary may not apply to all potential investors. You must hold each investment for a Three-Year Period to retain the reliefs summarised below. Reliefs are only available on your investment in EIS qualifying shares. You should seek advice in relation to tax reliefs. Income tax relief You can reduce the amount of income tax you pay by 20% of the amount you subscribe to the Fund. As an example, if you subscribe 100,000 to the Fund, you can reduce the amount of income tax you pay by 20,000. This relief is available on the first 500,000 that you subscribe to EIS investments in each tax year. If you subscribe more than 500,000 to the Fund in any tax year, the reduction in your income tax bill for that year will be 100,000. You cannot claim relief of more than the amount of income tax that you are due to pay. You can claim the relief against your income tax liability in the year that Foresight makes each investment or in the preceding year. As an example, if Foresight invests the whole fund in the 2011/2012 tax year, you can claim all your income tax relief against your tax liability for 2010/2011 and/or 2011/2012. If the investment period extends into the 2012/2013 tax year, you would still be able to claim against your 2011/2012 tax bill. Capital Gains Tax Deferral Relief You can defer capital gains up to the amount of your subscription to the Fund. This applies to gains you have made in the three years before the effective date (see Timing across) and gains you make up to one year after the effective date. Gains are deferred until you sell the investments that Foresight has made for you through the Fund. Capital gains tax will apply to the deferred gain at the rate current when the investments are sold. Capital Gains Tax Exemption Any capital gains realised on a disposal of Shares in an EIS Qualifying Company after the Three Year Period, and on which EIS relief has been given and not withdrawn, will be capital gains tax free. Any capital gains realised on a disposal within the Three Year Period will be subject to capital gains tax, but in respect of gains realised after 23 June 2010 the effective rate of CGT is either 18% or 28% for individuals (the tax rate used depends on the total amount of the individual s taxable income). Inheritance Tax Relief Once held for at least two years, your shareholdings in EIS Qualifying Companies should qualify for 100% Business Property Relief. This means that they will not be part of your estate for inheritance tax purposes. Timing EIS tax reliefs become available each time that Foresight makes a qualifying investment from the Fund. As an example, if Foresight makes the first qualifying investment from the Fund in April 2011 and commits 10% of the Fund to that investment, then April 2011 is the effective date for working out the timing of your tax relief. Each Investee Company will produce EIS 3 certificates as soon as practical following investment, and Foresight will send you the EIS 3 certificate for your part of that investment. These certificates provide the evidence you need to claim income tax relief and capital gains tax deferral relief. Foresight expects to invest the Fund into Investee Companies by 31 March 2012, but there is no guarantee that all Investments from the Fund will be made by that date. This means that the effective dates for most of the Fund s Investments are likely to be in the 2011/2012 tax year, but some may be in the following year. Loss relief If any of the Investments that Foresight makes for you through the Fund are realised at a loss, you would be able to set the loss against your income and gains when calculating your liability to CGT and/or income tax in the year of realisation. This means that your maximum exposure to losses should not exceed 48% of your total investment after taking the income tax and loss reliefs into account (and assuming that your marginal rate of tax is 40%; if your marginal rate is 50% then the maximum exposure would be even lower at 40%). 06

9 Investment Opportunity In order to promote low-carbon energy, the UK Government and some other European countries have legislated to create the incentive of Feed-in Tariffs, which amount in effect to a government guarantee of long-term prices. In the UK alone, these incentives are expected to be worth over 3 billion to the renewable electricity industry in the period to aims to enable individuals to be part of that industry and to benefit from the predictable revenue streams possible from Feed-in Tariffs, which in the UK are inflation-adjusted in line with the retail prices index. Foresight believes that solar power projects are particularly attractive for investors because the prices for electricity under the FIT Scheme are effectively guaranteed by the UK Government for 25 years and the technology involved is wellproven and reliable. The FIT Scheme also rewards solar electricity production above all other renewable sources, reflecting its higher capital cost and allowing for relative differences in energy yield. Prices under the FIT Scheme are set to reduce each year for new installations, but Foresight expects the Fund to be substantially invested before 31 March 2012, the last date for which the current FIT Scheme rates are expected to apply (see page 17 in relation to the review of the FIT Scheme). In the UK, investment of over 170 billion would theoretically be required at current prices to exploit the potential PV solar generating capacity as estimated by Foresight on the basis of advice provided to the UK Government. Taking into account the various practical constraints, such as funding, planning permission and resource availability at equipment manufacturers and installers, Foresight estimates a funding requirement in the UK in 2011/12 of 750 million. Fund Manager Since establishing its solar power team in 2007, Foresight has invested in solar power projects with a total transaction value of more than 150 million, demonstrating its ability to source opportunities, arrange bank finance and complete investments. The current portfolio of Foresight s first solar fund has total forecast generating capacity of 29 megawatts. Foresight s team of 12 environmental investment managers has been assembled gradually, allowing time to integrate their experience in renewable energy investing and operational management with Foresight s proven strengths in private equity and EIS fund management. Foresight s achievements in the environmental arena were recognised in 2009 when the firm was named New Energy Investor of the Year. Foresight has been managing UK tax-efficient funds for more than 12 years and is responsible for more than 160 million of VCT and EIS fund capital. As well as launching its own funds, Foresight has also won the support of the independent boards of five other funds to take over the management role in place of the incumbent managers. Foresight was named Venture Capital House of the Year at the November 2009 Unquote British Private Equity Awards. Foresight has demonstrated its ability to deliver value for investors. Its first institutional fund raised 20 million and returned 80 million to investors. In the VCT sector, Foresight is responsible for the best performing fund in terms of total return, outperforming more than 30 other managers of VCTs in a sector that has raised more than 3.5 billion over 14 years. Its Foresight 3 VCT is ranked 2nd among 56 VCTs that raised capital in 2004/5. Foresight s first environmental EIS fund has recently completed its initial investment phase, providing investors with exposure to wider UK environmental opportunities just as these sectors are showing exceptional growth. 07

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11 Investment Strategy The Fund will invest primarily in a portfolio of EIS-qualifying companies that will acquire Solar Power Systems backed by the FIT Scheme or similar long-term government-backed price guarantee mechanisms. Investee Companies will not generally incur risks related to applying for planning permission or other pre-construction risks, which will usually be the responsibility of the Fund s installation partners. Foresight will seek to sell the Fund s portfolio within five to six years to generate capital gains for investors. An Individual Roll- Over Option is available for Investors who wish to hold their investment for the long term and to benefit from a reliable stream of dividends over the full 25-year Feed-in Tariff (see Roll-Over Option on page 10). The Fund will seek to maximise the aggregate generating capacity of its portfolio by inviting other funds, including Foresight Solar VCT, to co-invest in the portfolio and by using third party gearing as appropriate. Foresight believes that this approach will maximise value for Investors, on the basis that the sale of a larger portfolio is likely to be more attractive to potential acquirors and should therefore generate a premium value. Investments may be made in companies seeking to generate renewable energy from other sources provided that these benefit from the FIT Scheme or similar long-term governmentbacked price guarantee mechanisms. The majority of Solar Power Systems financed by the Fund are expected to be in the UK, but the Fund may also invest in other countries, provided that substantially all of the Fund s investments are made in EIS-qualifying companies. Pending investment or distribution, any uninvested funds may be held in cash, interest bearing securities or other investments. In order to comply with EIS rules, Foresight will seek to invest exclusively in companies meeting the following criteria: consolidated gross assets do not exceed 7 million immediately before the investment and 8 million immediately afterwards; fewer than 50 full-time employees (or full time equivalent) at the time of investment; EIS and VCT fundraising of no more than 2 million in any 12 months. Dealflow Foresight has a strong flow of solar investment opportunities through partnering relationships with installers, operators and developers and from its network of contacts with property owners and professional advisers. In the UK there are more than 300 installers accredited under the Microgeneration Certification Scheme, ranging from large and well-established companies to smaller and younger businesses. If the UK market for solar power expands as predicted, installers, developers and operators have the opportunity to grow rapidly, a growth that could be constrained by lack of finance for investment. As a provider of such finance, with a track record in the solar industry, Foresight believes that it is an attractive partner for such businesses. Foresight has already worked effectively with installers and operators in Italy and Spain and has built similar relationships with installers in the UK. In November 2010, Foresight announced a strategic partnership with Solarcentury, a leading supplier and installer of Solar Power Systems. Foresight plans to invest the Fund by 31 March 2012, in order to take advantage of the highest UK guaranteed prices under the FIT Scheme. Foresight s pipeline of potential investments totalled over 500 million in January Returns The Fund is designed to provide attractive returns to Investors by combining initial tax relief of 20% with tax-free capital gains on sale of the Investments, and to offer relief from inheritance tax plus the opportunity to defer CGT deferral opportunities. For Investors wishing to maximise capital growth and to realise their investment in five to six years, Foresight aims to deliver a capital return of 130p per 1 invested in the Fund by April If the planned level and timing of sale proceeds is achieved, then Investors benefiting from full EIS tax reliefs would achieve a tax-free cash profit of 63% of their net cost of investment, and a gross equivalent compound annual return of 16.7% per annum (assuming that the Investor s marginal rate of income tax is 50%). Investors looking for income and wishing to hold their investment for the long term should expect to receive an annual yield of 6.3% (calculated on the amount subscribed less income tax relief) after the first year. Interest earned on cash balances held in the Fund will be added to the relevant Investor s subscription. 09

12 Accumulator Option Income available for dividends will normally be paid to Investors as and when it arises. If you prefer to roll up dividend entitlements in order to maximise capital gain, please select the Accumulator Option on the Application Form. Foresight will seek to convert your entitlement to dividends into an increased call on the capital in each Investment, to be realised in years 5-6 as a capital gain. The Accumulator Option will be structured within the articles of association of each Investee Company so that future Investment returns are shared (as between those Investors who take their dividends and those who roll up their dividend entitlements) in proportion to the aggregate of (i) the amount of each Investor s initial investment; and (ii) the amount of dividend entitlements which each Investor has rolled up. If you and members of your family intend to invest in the Fund, you should consider taking independent tax advice if one or some but not all of them intend to select the Accumulator Option. This is because HMRC may treat dividend entitlements converted under the Accumulator Option as a settlement of income on your spouse, civil partner or a child, which would remain taxable on you. Individual Roll-Over Option Some Investors may wish to stay invested for the longer term to take advantage of the 25-year income profile of solar power assets. Each Investor is therefore invited to tell us whether he or she wishes to exit in years 5-6 as planned or to stay invested for the long term. Each Investor may select the Individual Roll-Over Option at any time up to 30 June Selection may only be made in writing addressed to Foresight Group, ECA Court, South Park, Sevenoaks, Kent, TN13 1DU. Foresight will manage the Fund s Investments with the aim of providing the necessary flexibility consistent with meeting each Investor s preference to exit or remain invested for the long term. Under certain circumstances Foresight may be unable to meet the wishes of Investors in relation to the Individual Roll-Over Option. For example, if the Individual Roll-Over Option is exercised in respect of a relatively small proportion of the Fund, it may be impractical or uneconomic for the Fund to continue. Foresight may therefore decide to terminate the Fund and realise and distribute all Investments. Liquidity Investors who need to realise their Investment early will be able to offer their Investments for sale through Foresight at their most recent valuation. Foresight will endeavour to arrange for any Investments so offered to be bought in by the Investee Companies, or acquired by the Foresight VCTs or other Investors. This does not imply any obligation on the part of the VCTs to acquire Investments and there is no guarantee that Investments offered can be sold or that they can be sold at their most recent valuation. 10

13 Charges Foresight intends that Investors should benefit from tax reliefs on the full amount of their subscription to the Fund. For this reason, the charges described below are payable by Investee Companies rather than by the Fund. The percentages shown below will be applied to the amount invested by the Fund in each Investee Company. The charges will accrue from 1 April 2011 and will be payable quarterly in advance from the date of investment in the relevant Investee Company. VAT will be added where applicable. Fund Management Charges Annual management charge 1.5% Secretarial charge 0.3% (subject to an index-linked minimum of 60,000 in aggregate) Foresight will bear any legal, accounting and other fees incurred by the Fund in connection with potential Investments which do not proceed to completion and may retain for its own benefit any arrangement fees and directors or monitoring fees which it receives in connection with Investments. Performance Incentive Foresight will be entitled to a performance incentive fee, payable from the proceeds of realising the Fund s assets. This fee is only payable once Investors have received proceeds of at least 1 per 1 invested. The performance incentive fee is calculated as 20% of distributions to Investors in excess of 1 per 1 invested until total distributions reach 130p per 1 invested and 30% above that level. Fundraising Charges Initial charge 5.5% Annual trail commission 0.5% Foresight will receive the initial charge and will pay the costs of establishing the Fund, including introductory commission to authorised financial advisers, legal and taxation costs, the preparation of this Information Memorandum and any other direct expenses incurred. Annual trail commission will be paid to your adviser for up to six years and is capped at 3% of the amount you subscribe to the Fund. The administration of annual trail commission will be managed by Foresight Fund Managers Limited which will maintain a register of advisers entitled to trail commission. If you change your adviser, you should inform Foresight Fund Managers Limited of the details of your new adviser, who will be entitled to receive the annual trail commission instead. Advisers should keep a record of Application Forms submitted bearing their stamp to substantiate any claim for annual trail commission. Fund structure The Fund comprises a number of discretionary managed Portfolios, which are managed in accordance with the investment objectives and restrictions set out in Schedule 1 of the Investor s Agreement. Each Investor for legal and tax purposes is the beneficial owner of a specific number of shares in each Investee Company, the aggregate of which comprise his or her Portfolio. The combined Portfolios comprise the Fund which is as an unapproved EIS fund. The Nominee will be the registered holder of all Investments of the Fund. The Fund is not a collective investment scheme within the meaning of section 235 of the Financial Services and Markets Act 2000 because it is a complying fund within the meaning of Article 2 of the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 and, pursuant to clause 15.2 of the Investor s Agreement, Investors are entitled to the withdrawal rights prescribed by that Article. Notwithstanding this, as Investors in the Fund will make Investments together and their Investments will be managed by the Fund Manager on a common basis, the Fund will constitute a collective investment undertaking within the meaning of the Markets in Financial Instruments Directive ( MiFiD ), which came into force in the UK on 1 November Therefore, by virtue of the exemption for collective investment undertakings in article 2.1(h) of MiFiD, the Fund falls outside the ambit of MiFiD. This means, in particular, that Investors may participate in the Fund as professional clients if their financial adviser is prepared to certify that that they have the expertise, experience and knowledge to understand the risks involved in a participation in the Fund and that they are capable of making their own investment decisions. Investors who do not have financial advisers may participate if they can be assessed as a professional client by Foresight. There is no requirement to demonstrate a minimum net worth or level of dealing or previous employment in a professional capacity in the financial sector. How to Invest Please read the Investor s Agreement and complete the Application Form, both of which are included in this document. You can invest any amount from 10,000 upwards, subject to the amount being a multiple of 1,000. Please send the completed Application Form to us by post. We will notify you if we accept your application and our acceptance of your Application Form will create a binding agreement between you and Foresight. 11

14 Introduction to solar power investing Enough solar energy reaches the earth every hour to meet the world s energy consumption for a whole year. After forty years of development, the technology to harness some of this energy in the form of electricity is tried and tested and familiar to many people from the images of solar panels published in so many newspapers, magazines and online. It is generally a more expensive way to generate electricity than the burning of fossil fuels, but enjoys government financial support as part of the drive to reduce greenhouse gas emissions by building renewable energy generating capacity. The European Union decided many years ago to promote renewable energy as part of the response to climate change. Over the last ten years, Germany, Spain and Italy among others have demonstrated how massive private sector investment in renewable energy can be unleashed by longterm prices effectively guaranteed by governments. In 2010 the UK adopted a similar price incentive, called a Feed-in Tariff. This Feed-in Tariff, effectively guarantees for 25 years an inflation-linked price for electricity generated by qualifying Solar Power Systems. Foresight believes that solar power generation supported by Feed-in Tariffs is attractive for investors in a time of economic uncertainty and austerity in government spending. Demand for solar electricity in the UK is not dependent on a general economic recovery and is expected to grow at rates well above GDP growth. The Feed-in-Tariffs in the UK are not paid by the government and were not altered by the Comprehensive Spending Review of October The UK Government has committed to ensure that 15% of all of the UK s energy needs are met from renewable sources by 2020 and this commitment implies a need for investment of an estimated 100 billion, part of which is expected to be directed to solar power. Spain, Italy and other EU countries have similar commitments. Having invested in solar power installations in Spain and Italy over the last three years, Foresight understands the exciting opportunities that Feed-in Tariffs can unlock for private investors. Foresight has already established relationships with installers, banks and other key counterparties and created a pipeline of investment opportunities. With a three year track record in solar power investing and an in-house team of experts in project finance, procurement and operations, Foresight intends to play a leading role in opening the solar power opportunity to private investors. Many people are aware of solar power, but have questions about how it works, whether it is economic or how Investors can profit from it. This Introduction to Solar Power Investing is intended to answer some of the more common questions. It does not seek to provide all the information necessary to invest successfully in solar power and does not constitute advice in relation to the Fund. with a sheet of glass on the front to protect the semiconductor wafers from weather and physical damage, creates a solar panel of the sort so often depicted in the media. A typical photovoltaic Solar Power System will comprise a number of panels connected together and linked to an inverter, a standard item of electrical equipment that converts the direct current generated by the panels into alternating current, the form of electricity supplied through the electricity mains. Panels may be mounted on rooftops or on the ground, and may be fixed or track the sun. Large numbers of PV systems have already been installed, mostly in other EU countries using crystalline silicon-based panels. Systems of this type are the main focus for the Fund and are referred to in this document as Solar Power Systems. Solar Panel anti-reflective coating silicon layers Photovoltaic Cell metal conductor strips metal backing What about watts? To calculate the potential revenue that a Solar Power System can generate, we need to know both the value of each unit of electricity and the number of units that can be expected to be generated each year, termed annual output and measured in kilowatt-hours (kwh). Annual output is a function of a Solar Power System s peak capacity, measured in kilowatts peak (kwp), the amount of solar energy reaching its panel(s), and a performance factor that allows for the alignment of the panels in relation to the sun, as well as the temperature and other factors. A typical, well-sited Solar Power System in the UK can produce an annual output of 900 kilowatt-hours of electricity for every 1 kilowatt of peak capacity. Capacity is related to the physical size of the panels and the efficiency with which they convert solar energy into electricity. Efficiency is typically guaranteed by the panel manufacturer. Annual output is forecast using meteorological data for average monthly sunlight levels for different geographical areas, allowing for weather and the number of daylight hours. Foresight s experience suggests that estimates properly based on this data are reliable. (a megawatt = 1,000 kilowatts; a gigawatt = 1,000,000 kilowatts) What is solar power? The building blocks of a solar power generator are photovoltaic cells, typically made of semiconductor material such as crystalline silicon, which converts light into electricity. Packaging a number of these photovoltaic cells into a frame, 12

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16 An Introduction to Solar Power investing Insolation solar energy reaching the UK Units are kilowatt-hours per m 2 per year Source: Design of Feed-in Tariffs for Sub-5MW Electricity in Great Britain, quantitative analysis prepared for Department for Energy and Climate Change, July 2009 Vital statistics for some examples of PV Solar Systems: Capacity Output in kilowatt-hours annually* in kw peak uk Italy Spain School rooftop , , ,000 warehouse rooftop , , ,000 Ground-mounted 2,000 1,738,000 2,700,000 2,800, *Based on data from the Photovoltaic Geographical Information System ( PVGIS ) for London, Brindisi (Italy) and Toledo (Spain)

17 An Introduction to Solar Power investing Is the equipment reliable? Solar Power Systems have few moving parts and operate over long periods with minimal maintenance. The UK Government has stated that PV is easier to deploy than other technologies and carries less risk to the investor since it is a tried and tested technology. Research by the independent EU Energy Institute suggests that more than 90% of the solar panels on the market ten years ago remain capable of performing well after thirty years of life, albeit with a slight drop in performance. The major suppliers of solar panels usually guarantee the efficiency of their equipment over long periods. Typical guarantees underpin 90% of the rated efficiency for ten years and 80% for the remaining fifteen years. The top ten suppliers worldwide of photovoltaic solar panels in 2009 were First Solar, Suntech, Sharp, Yingli, Trina Solar, Sunpower Corporation, Kyocera Corporation, Canadian Solar Inc., SolarWorld AG and Sanyo Electric. Solar Power Systems owned by Investee Companies will generally be installed and maintained by specialist contractors, who may also provide guarantees to supplement the core equipment guarantees. Such guarantees and contracts are of course subject to normal commercial limitations. Why is solar power interesting now? The UK Government has recently decided to follow the lead set by other EU countries and in April 2010 implemented new Feed-in Tariffs FITs for short. The UK 2010 FITs effectively guarantee inflation-linked prices for electricity produced by Solar Power Systems for 25 years, at a level which has been calculated to offer attractive returns on investment. Similar schemes introduced in Germany, Spain and Italy a number of years ago stimulated major investment in the sector. Foresight has been investing in solar power projects in Italy and Spain since 2008 and believes that the UK FITs will drive a wave of investment which the Fund can exploit. Getting FIT The Energy Act 2008 introduced powers for the Secretary of State to implement FITs. These powers were exercised to modify the standard UK conditions which govern the supply of electricity by electricity suppliers. The UK FIT Scheme requires licensed electricity suppliers to pay the owner of any Solar Power System who complies with the UK FIT Scheme a Generation Tariff, effectively a guaranteed inflation-linked premium payment on every unit of electricity generated. In addition, the owner is free to use or sell the electricity separately, either at a guaranteed price initially set at 3p per kilowatt-hour (the Export Tariff ) or in the open market, where prices have been around 6p per kilowatt-hour. Assuming moderate to high demand, research published by the UK Government suggests that traded electricity prices may rise by 5-14% in total between 2010 and 2020 depending on the level of investment in supply, potentially increasing revenues to the owners of Solar Power Systems. Both the Generation Tariff and the Export Tariff are index-linked to the Retail Prices Index in order to maintain the real value of the tariff revenue streams over time. Compliance with the UK FIT Scheme requires the owner of an eligible Solar Power System to agree standard terms and conditions. An electricity supplier cannot impose conditions on an owner of a Solar Power System which are additional to or more onerous than those that are necessary to enable the electricity supplier to meet its obligations under the UK FIT Scheme. Owners must also be entered in the register maintained by The Gas and Electricity Markets Authority in the UK pursuant to The Feed-in-Tariffs (Specified Maximum Capacity and Functions) Order 2010 (SI ). The UK 2010 Generation Tariff depends on the capacity of the Solar Power System and the date on which it is installed. Smaller systems get a higher price to compensate for the lower economies of scale, while installations after 31 March 2012 will get a lower price to match an expected fall in the capital cost of Solar Power Systems as the market grows. The UK FIT Scheme does not apply to Solar Power Systems with a net capacity of more than 5 megawatts peak. UK 2010 Generation Tariff in pence per kilowatt hour Installation date: Up to kW or less Over 4kW up to 10kW Over 10kW up to 100kW over 100 kw to 5 MW This table does not show all UK 2010 FITs. The revenue potentially available to the owner of a Solar Power System under the UK FITs is calculated by combining the annual output multiplied by the Generation Tariff (which is effectively a renewable energy bonus) with the annual output multiplied by the Export Tariff (the price at which the electricity will actually be sold). Is solar power economic, particularly in the UK? The long-term prices, effectively guaranteed, under the FITs are deliberately set high enough to provide an attractive return on investment after taking into account the system cost, sunlight available and other factors which vary by location. The potential economic returns to owners of Solar Power Systems that are properly installed in appropriate locations are well-documented. 15

18 An Introduction to Solar Power investing What can we learn from experience in other EU countries? The potential effect of Feed-in Tariffs is illustrated by the German experience, where the growth rate of the PV solar industry averaged 70% per year over several years. In the UK, research published by the UK Government suggests that spare supply capacity in other countries both in manufacturing and installation of Solar Power Systems could be used to meet rapidly growing UK demand and this means that in the short term annual UK sales may be able to grow at a significantly higher annual rate than 70%. For this reason, the UK Solar Power System industry may install capacity of 50 MW peak in the first year of the policy, more than five times the rate achieved previously. During the growth of the solar industry in Germany, much larger year-on-year increases in sales occurred in individual years. Comparing potential UK uptake of Solar Power Systems to the German experience Annual PV Uptake (MW per year) This chart was published in the July 2009 report Design of Feed-in Tariffs for Great Britain commissioned by the UK Department of Climate Change. Germany time shifted UK predicted UK actual How big is the market opportunity? In the UK, investment of over 170 billion would theoretically be required at current prices to exploit the potential PV solar generating capacity of around 70 million kwp as estimated by Foresight on the basis of advice provided to the UK Government. Taking into account the various practical constraints, such as funding, planning permission and resource availability at equipment manufacturers and installers, Foresight estimates a funding requirement in 2011/12 of 750 million in the UK. How long will it take to get the Fund invested? Foresight plans to invest the Fund by the end of March 2012, in order to take advantage of the highest UK guaranteed prices though may extend the investment period by up to 12 months if the Fund is not fully invested by 31 March Foresight s pipeline totalled over 500 million of potential investment in January In order fully to invest the net cash raised by the Fund, assuming gross funds raised of 20 million, Foresight believes that it will need to source opportunities with a total investment volume of between 38 million and approximately 125 million depending on the level of third-party lending used. This represents a small part of the financing opportunity that is expected to be available during the target investment period. How does Foresight source investments? Foresight sources solar investment opportunities through partnering relationships with installers, operators and developers and from its network of contacts with property owners and professional advisers. In the UK there are more than 300 installers accredited under the Microgeneration Certification Scheme, ranging from large and well-established companies to smaller and younger businesses. If the UK market for solar power expands as predicted, installers, developers and operators have the opportunity to grow rapidly, a growth that could be constrained by lack of finance for investment. As a provider of such finance, with a track record in the solar industry, Foresight can be an attractive partner for such businesses. Foresight has already worked effectively with installers and operators in Italy and Spain and is building similar relationships with installers in the UK. What returns can be expected from the portfolio? Foresight aims to achieve returns sufficient to exceed the target for total return of 130p over six years. In order to achieve these returns, Foresight will focus on three key aspects of the selection and management of Solar Power Systems: Minimising system cost one of the main determinants of returns is the installed cost of Solar Power Systems, the key element of which is module cost, which fell significantly during 2009/2010. The Fund will seek to minimise installed cost, subject to obtaining appropriate guaranteed quality. Selecting locations Foresight expects returns to be higher for a Solar Power System located in an area with more solar radiation than the UK average, for example in southern England. Leverage and realisation calculated returns can be boosted by leveraging the Fund s investment with third-party lending and by selling assets at the end of the planned exit period to buyers willing to accept a lower future yield on the investment. Foresight has secured significant levels of banking finance for solar power investments during and since the credit crisis and has wide experience of realising investments. Returns from the Fund s portfolio will also depend on a number of other factors, including the timing of deployment of the funds raised and the level of UK inflation. How can the Fund realise investments? Foresight believes that operational solar power assets will be attractive to utilities, pension funds, insurance companies and other investors and will be readily marketable within the planned exit timeframe. Where Foresight does not control Investee Companies, it typically seeks to agree a timetable for exit with other stakeholders before investing. Refinancing potentially offers an alternative route to liquidating part of the portfolio ahead of exits. 16

19 An Introduction to Solar Power investing What competition will Foresight face? Foresight has demonstrated its ability to compete successfully in the solar sector in Spain and Italy and believes that its in-house sector expertise, track record and entrepreneurial approach provide a powerful competitive advantage in many situations. A variety of other investors are or will become active in the UK, Italy and Spain and may compete to provide equity finance. In some cases, equity finance for the installation of Solar Power Systems may be provided by the owner or occupier of the building or land, by a utility or by the installer or even the equipment manufacturer. Will the guaranteed prices fall in future? Under the UK 2010 FITs, the Generation Tariff applying to each Solar Power System will increase in line with the RPI each year from the date of installation for 25 years. The UK Government has expressed the intention not to change the Generation Tariff in respect of systems already installed at the time of any future change in the scheme. The UK 2010 FITs do reduce over time, but these lower prices apply to later installations and not to Solar Power Systems installed in the initial periods. In February 2011 the Government announced a review of the FIT regime, confirming that any resulting changes to the FITs would take effect after 31 March 2012 and would not be retrospective. However the announcement also proposed a separate review of the FIT for large solar PV systems. Large systems are defined as having greater than 50kW generating capacity, which is about 20 times the size of a typical domestic rooftop system. This separate review could result in changes taking effect during The Government s objective is to prevent large solar PV systems taking an excessive share of the overall FIT cost and to allow this overall cost to grow to 360 million annually in 2014/15 instead of 400 million. The announcement has no immediate relevance for the sub- 50kW solar opportunity, which in Foresight s view could absorb around 1.5 billion of capital investment and supports the return targets of the Fund. Foresight s pipeline includes 165 million of opportunity in the sub-50kw size category. Will the opportunity be affected by cuts in government spending? The long-term prices, effectively guaranteed, under the FITs are not paid by the UK Government. Instead, UK legislation requires the major electricity suppliers to pay the prices directly to owners of Solar Power Systems. The costs are spread among all licensed electricity suppliers, and may be passed on to consumers as part of the normal bill for electricity consumption. What if there s a double-dip recession? In Foresight s view, the drivers of solar power investment are not related to general economic trends. The financial case for investment is based on the commitment of the EU to renewable energy, reflected in legally binding EU directives under which the UK has committed to source 15% of all energy from renewable sources by This target implies new investment of around 100 billion in the UK alone, some of which is expected to be directed to solar power. If some of the investments will be outside the UK, is there a currency risk? Foresight has been able fully to hedge currency exposure for all its solar power investments outside the UK and expects to do so for investments funded by the Fund in order to protect investors from currency movements against the pound sterling. For UK investments, depreciation of the pound sterling against the US dollar or the Euro would tend to increase equipment prices, potentially reducing the returns from investments made after such depreciation. Is there a shortage of equipment? Shipments of solar panels reached a record level in the final quarter of 2009 as suppliers increased production to serve booming European markets such as Germany, Italy, France and the Czech Republic. Foresight expects additional manufacturing capacity coming on stream to increase supply to the UK market. Solar panel prices have fallen and if growth in Germany slows in 2011 as some commentators expect there could be an oversupply of panels. Is planning permission a problem? The Town and Country Planning (General Permitted Development) (Amendment) (England) Order 2008 removed the need for planning permission in England for domestic rooftop Solar Power Systems, with limited exceptions. Non-domestic and ground-mounted installations usually require planning permission, but Foresight expects planning authorities to be supportive, on the basis that Solar Power Systems may have less visual and other impact on the local environment than other renewable energy technologies (with the possible exception of ground source heat pumps which may also have little visual impact). 17

20 Investment Team Since 2006 Foresight has built a highly-experienced team of 12 investment managers focused on the environmental sector. Supported by other Foresight partners, this team invested in environmental projects with a total value of more than 200 million between 2006 and Jamie Richards has led Foresight s solar energy team since inception in He has played a key role in creating Foresight s network of lenders, advisers, installation contractors and asset owners, and has been directly involved in financing 30 megawatts of solar assets. Jamie is a chartered accountant with 17 years experience across fund management, banking and asset financing and has worked at PricewaterhouseCoopers, Citigroup and Macquarie. Pietro Zerauschek is responsible for operational and technical oversight of Foresight s European solar assets. Pietro is a qualified mechanical engineer with over 15 years engineering experience and has been providing technical advisory and engineering services for the financing, construction and operation of solar energy projects for five years. He is a director of the project companies for all Foresight s existing Italian and Spanish solar assets. Humberto Santillana joined Foresight from Fotowatio Renewable Ventures, a global solar energy operator with more than 130 megawatts of installed solar power capacity and more than 700 million invested in the sector. At Fotowatio, Humberto led solar investments in Spain and was responsible for structuring project finance and negotiation of installation contracts. Humberto has also worked within the solar team at Babcock & Brown. Federico Giannandrea trained as a lawyer with Allen & Overy in Rome before joining Deutsche Bank, London in There he was involved in the acquisition of solar and other renewable energy assets in Poland, Spain, Greece, Belgium and Italy, structuring and negotiating key elements of a portfolio with electricity generating capacity of 2 gigawatts. As a vice-president within the renewable energy team, Federico led the project financing and installation contracting for an 8 megawatt solar power plant project in southern Italy and was involved in several other solar and wind power projects. Diomidis Dorkofikis gained a degree in Industrial Management & Technology and a masters degree in corporate finance before joining Millennium Bank, Athens as a project finance analyst. At Millennium Bank he specialised in renewable energy and other infrastructure and property investments and was involved in the sale of two wind power projects with capacity of 48 megawatts and in the appraisal of a solar power project. He joined Foresight s Rome office in September Matt Taylor has an 18-year track record in private equity investment management, first with 3i Group plc and since May 2000 with Foresight. Matt s first experience of environmental investment came in 1991 when he joined IKB Deutsche Industriebank AG, a partner for the environmental support programmes backed by Germany s Kreditanstalt für Wiederaufbau. Andrew Page spent nine years in operational management roles in industry before starting his career in private equity management in Andrew guides engineering procurement and management activities across all environmental companies within Foresight s portfolio. His operational experience in engineering management allows him to contribute unique insight to selection and management of project-based investments. Nigel Aitchison has a deep understanding of project management and engineering in the environmental sector. As managing director of Shanks PFI Investments, Nigel successfully completed two major project financings and raised over 150 million in bank financing. Nigel is a Chartered Environmentalist. Giles Whitman has played a key role in the development of Foresight s pipeline of UK solar investment opportunities. Prior to joining Foresight in 2008 he was involved in assessing potential acquisitions in the energy consultancy and utility infrastructure sectors for Spice plc. He has also been responsible, as an equity research analyst for HSBC Investment Bank, for researching and valuing major wind-turbine manufacturers. Giles is a Chartered Accountant. Tom Thorp is a Chartered Accountant with over five years experience in financial analysis and due diligence reporting with KPMG s Transaction Services and Restructuring teams both in London and Munich. He has advised on a wide range of industries, performing acquisition and vendor due diligence as well as advising on company refinancings and working capital exercises for demergers and AIM listings. James Samworth has 10 years experience in manufacturing and commercial roles within Corus (previously British Steel), helping to improve the performance of large manufacturing plants and holding responsibility for 100 million sales accounts. James gained private equity experience through internships at Lyceum Capital, Actis, NextWave Ventures and Deutsche Bank before joining Foresight in James gained an MBA with distinction at London Business School and a 1st class Natural Sciences degree from Cambridge University. 18

21 Investment Team Senior Partners Three further partners of Foresight will play important roles in relation to the Fund. Bernard Fairman and David Hughes are members of Foresight s investment committee, whilst Gary Fraser heads Foresight s finance and administration department. Bernard Fairman is the chairman of Foresight Group and is responsible for group business development, strategy and administration, as well as having final responsibility for all significant investment decisions made on behalf of funds managed by Foresight. Over the past 25 years he has led Foresight s development into a business that now manages over 200 million with 28 staff in the UK, Italy and Spain, and in 1997 launched the best ever performing VCT. For ten years he was a director of smartcard innovator Gemplus, involved in its growth from start-up to over $1 billion annual revenues. Early experience as an analyst for the oil industry led Bernard to grasp the opportunity of renewable energy and, in 2005, to turn Foresight s focus towards sustainable environmental investing. David Hughes is responsible for Foresight s private equity investment activities and portfolio management. David has 36 years experience of unquoted investment management, initially with 3i and subsequently establishing fund management operations for Framlington Investment Management Ltd, Baltic plc and Bank Austria AG, London. He has been involved in VCT management since Gary Fraser directs financial management and compliance, a role he has fulfilled at Foresight for six years. He was previously company secretary for Baronsmead VCTs and other companies and funds within ISIS Asset Management plc. He qualified as a Chartered Accountant with Ernst & Young in 1996 and has been involved in raising over 1 billion for a range of companies. Bernard Fairman Chairman of Foresight Group & Foresight Solar David Hughes Chief Investment Officer Gary Fraser Partner Jamie Richards Partner & CEO Pietro Zerauschek Partner & Technical Director Humberto Santillana Investment Director Federico Giannandrea Investment Director Diomidis Dorkofikis Investment Manager Matt Taylor Partner Andrew Page Partner Nigel Aitchison Industrial Partner Giles Whitman Senior Investment Manager Tom Thorp Investment Manager James Samworth Investment Manager Track Record* VCTs managed exclusively by Foresight Group Fund timeframe effective Net Total Return*** IRR with initial Issue Price** tax break**** Fleming Ventures p 400p n/a Foresight VCT ( O ) p 221p 23.85% Foresight VCT ( C ) p 92p -3.11% Foresight VCT ( O )* 2007 to date 83p 53.3p -5.66% Foresight 2 VCT 2005 to date 60p 89.7p 7.06% Foresight 2 VCT ( C ) 2007 to date 70p 114p 26.24% Foresight 3 VCT 2004 to date 90.3p 109.7p 23.60% Foresight 4 VCT 2004 to date 91.2p 125.1p 17.22% * Foresight VCT O and C shares merged in January 2007 to form new Foresight VCT O shares ** Effective Net Issue Price - 1 subscription price less income tax relief where applicable *** Total Return = Dividend distributions + Net Asset Value as at 14 September 2010 **** Source courtesy of Martin Churchill: NB: Foresight 3 & 4 VCTs were originally managed by Advent. Foresight took over the management of these funds in July

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23 Directory Fund Manager and Promoter Foresight Group CI Limited La Plaiderie House La Plaiderie St Peter Port Guernsey GY1 4HE Foresight Group LLP ECA Court South Park Sevenoaks Kent TN13 1DU United Kingdom T: F: Administrator and Nominee Foresight Fund Managers Limited ECA Court South Park Sevenoaks Kent TN13 1DU United Kingdom T: F: Solicitors and Tax Advisers RW Blears LLP 125 Old Broad Street London EC2N 1AR T: E: 21

24 Risk Factors Prospective Investors should be aware that the value of investments through the Fund can fall as well as rise. Investors should be fully aware of the high risk nature of this type of investment. In addition, statements concerning taxation are merely a brief summary and should not be viewed as constituting tax advice. The information below does not purport to be exhaustive. Additional risks and uncertainties, not presently known to the Fund Manager, or which the Fund Manager currently deems immaterial, may also have an adverse effect on the Fund and on Investments. Investors should consider carefully whether an investment in the Fund is suitable for them in the light of the information in this document and their personal circumstances. If in any doubt whatsoever, an Investor should not subscribe. In any case, it is strongly recommended that Investors seek the advice of their financial adviser or other appropriately qualified professional adviser. Risks relating to the Investee Companies The Investee Companies will be small, unquoted companies. There is no market, nor is there intended to be a market, for Investments; as such, an Investment will not be Readily Realisable. It is not intended that any income or capital will be returned to Investors during the Three Year Period. After the Three Year Period, it may still be difficult to realise Investments or to obtain reliable information about their value as the market for shares in smaller companies is often less liquid than that for shares in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such shares. The performance of the Fund is dependent on the ability of the Fund Manager to identify appropriate Investee Companies and on the ability of the Investee Companies to perform in line with their respective business plans. The income from the Investee Companies will depend on the revenues generated by the activities undertaken by such companies, which may be less than the costs incurred by such companies. Investment in smaller, unquoted companies, by its nature, involves a high degree of risk. Proper information for determining their value or the risks to which they are exposed may also not be available. Investment in such companies can offer good investment returns but by its nature is illiquid and uncertain and consequently involves a higher degree of risk than a portfolio of quoted shares. Realisation of investments in unquoted companies can be difficult and may take considerable time. Investee Companies may be affected by divergence between forecast and actual levels of solar radiation, or by changes in legislation, or by changes in the rates of Feed-in Tariffs, interest, inflation, foreign exchange or tax, or by changes in prices of solar panels and other capital equipment, energy, or financing, or by changes in labour, maintenance, safety or other operating costs, or by operating and technical risks, including risk of mechanical breakdown, failure to perform according to design specifications, failure to obtain accreditation and registration with Ofgem for Solar Power Systems, unavailability of grid connection, labour and other work interruptions and other unanticipated events that adversely affect operations. It is expected that major suppliers of solar panels will guarantee the efficiency of their equipment over long periods. Investments will only be made in Investee Companies where Foresight believes that any relevant counterparties are, and will remain, financially strong, but such judgements on the part of Foresight necessarily involve risk and uncertainty because they relate to future events and circumstances which may affect the financial strength of counterparties. It is possible that counterparties could be unable to meet guarantee obligations. The standard UK conditions of electricity supply licences, as recently modified by the UK Secretary of State, provide that from the date on which the owner of an eligible Solar Power System is entered in the register maintained by The Gas and Electricity Markets Authority in the UK the relevant electricity supplier must commence Feed-in Tariff payments at the rates provided for in the FIT Scheme from the next payment cycle or the date on which standard terms are agreed between the owner and that electricity supplier. UK electricity suppliers cannot impose conditions on an owner of a Solar Power System which are additional to or more onerous than those that are necessary to enable the electricity supplier to meet its obligations under the FIT Scheme. This amounts effectively to a UK government guarantee of the long-term prices provided for in accordance with the FIT Scheme. However, the UK government does not guarantee the solvency of electricity suppliers and if an electricity supplier were to collapse or if its financial strength deteriorates then its obligations to owners under the FIT Scheme may become worthless. It is believed that the same solvency risk is likely to exist in relation to overseas Feed-in Tariffs. Investee Companies may incur unplanned costs and delays as a result of statutory and regulatory requirements, including those imposed by environmental, safety, labour and other regulatory and political authorities, or where construction operations do not proceed as planned, or where insurance is not adequate or as to which inadequate reserves had been established, risks arising out of the presence of certain construction materials, force majeure acts, terrorist events, or other operating risks. The level of returns from Investments may be less than expected if there is delay in the investment programme, such that all or part of the Fund is held in cash or near cash Investments for longer than expected, or if the returns obtained on Investments are less than planned, or if Investments cannot be realised at the expected time and values. There can be no guarantee that suitable investment opportunities will be identified in order to meet the Fund s objectives. The departure of any of the Fund Manager s members, partners or employees or those of its Associates could have a material adverse effect on the performance of the Fund. Whilst the Fund Manager has entered into appropriate agreements with its members, partners, employees and Associates, the retention of their services cannot be guaranteed. The past performance of Foresight Group is not necessarily a guide to its future performance and may not necessarily be repeated. The value 22

25 Risk Factors of Investments and income from them may go down as well as up and Investors may not get back the amount they originally invest in the Fund. Risk Factors This document should not be considered as constituting legal, taxation or investment advice by the Fund Manager or its advisers. Each party to whom this document is made available must make its own independent assessment of the Fund after making such investigations and taking such advice as may be deemed necessary. In particular, any estimates or projections or opinions contained in this document necessarily involve significant elements of subjective judgement, analysis and assumptions and each recipient should satisfy itself in relation to such matters. Risks relating to the EIS qualifying status of the Investor There are circumstances in which an Investor could cease to qualify for the taxation advantages offered by the EIS. For example, Capital Gains Tax Deferral Relief could be lost if an Investor ceases to be resident or ordinarily resident in the United Kingdom during the Three Year Period. In addition, an Investor could cease to qualify for EIS Relief if he receives value from the Fund or one of the Investee Companies during the period beginning one year before the Shares in the Investee Companies are issued and ending on the conclusion of the Three Year Period. Payment of a dividend, however, would not typically be regarded as a receipt of value. Risks relating to the EIS qualifying status of the Investee Companies If an Investee Company ceases to carry on business of the type prescribed for EIS Qualifying Companies during the Three Year Period, this could prejudice its qualifying status under the EIS. The situation will be closely monitored with a view to preserving the Investee Company s qualifying status, but this cannot be guaranteed. A failure to meet the qualifying requirements for EIS could result in: Investors being required to repay the 20% income tax relief received on subscription for Shares and interest on the same; a liability to tax on capital gains on a disposal of the Shares; and any deferred gain crystallising. Further details of the taxation implications of an investment in an EIS Qualifying Company are set out in Appendix 1 of this document. Although provisional approval will be sought from HMRC that the Investee Companies and their activities should qualify under the EIS, there is no guarantee that the formal EIS claims will be agreed or that such agreement will not be subsequently withdrawn. In those circumstances, Subscription monies will not be returned to Investors. If an Investee Company fails to obtain EIS Qualifying Company status, or if it is subsequently withdrawn, EIS income tax relief and Capital Gains Tax Deferral Relief would not be available to Investors or could be withdrawn. Under HMRC EIS rules, EIS Qualifying Companies are required to have employed 100% of their net funds (after the deduction of issue costs) within 24 months after the date of issue of Shares, except where the qualifying activity consists of preparing to carry on a trade in which case the time limit is 24 months after the date of commencing the trade. If an Investee Company fails to employ this level of funds within the required deadlines, the Investee Company would be in breach of the EIS regulations and tax relief may be withdrawn. A sale of Shares in the Investee Companies within the Three Year Period will result in the 20% income tax relief available upon subscription for those Shares becoming repayable to HMRC and in any capital gains on such Shares and any deferred gain being subject to CGT. It is possible for Investors to lose their EIS Relief and/or Capital Gains Tax Deferral Relief and/or Business Property Relief by taking or not taking certain steps. Investors are advised to take appropriate independent professional advice on the tax aspects of their investment. Fund Issues The Fund Manager reserves the right to cease to manage the Fund in certain circumstances set out in the Investor s Agreement, in which event it will try to transfer the Portfolios to another fund manager or to terminate the Fund in an expeditious way, but there is a possibility that the Tax Advantages may be lost. The Fund Manager will seek to realise Investments and to terminate the Fund in an orderly fashion over a period of six years from the final Closing Date but it cannot be guaranteed that the Investments made can easily be realised within this period and, even where they can be realised, that this can be done on an advantageous basis. Generally, the Fund Manager reserves the right to return a small surplus of cash if it concludes that it cannot be properly invested. Potential Conflicts of Interest There may arise situations where the interests of the Fund conflict with the interests of other funds managed by the Fund Manager or with those of the Fund Manager itself. The Fund may invest in companies in which other funds managed by the Fund Manager may invest or may already hold investments. Decisions made by the Fund Manager may be more beneficial for one fund managed or advised by the Fund Manager than for any other. The Fund may co-invest with third parties or through joint ventures or other entities. Such co-investing may give rise to the possibility that a co-investor or partner may at any time have economic or business interests or goals which are inconsistent with those of the Fund, or that such person may take action contrary to the Fund s investment objectives. The entitlement of the Fund Manager to the performance fee referred to in Schedule 2 may create an incentive for the Fund Manager to make more speculative investments on behalf of the Fund than it would otherwise make in the absence of such a performance-based compensation arrangement. The Fund Manager may enter into fee sharing arrangements with third 23

26 Risk Factors party marketers, including placement agents, or other advisers who refer Investors to the Fund, and such marketers may have a conflict of interest in advising prospective investors whether to invest in the Fund. Conflicts of interest may arise in connection with decisions made by the Fund Manager that may be more beneficial for certain Investors than for any other. In making such decisions, the Fund Manager intends to consider the investment objectives of the Fund as a whole, not the investment objectives of any individual Investor. The Fund Manager may provide certain Investors with the opportunity to co-invest in Investments. Potential conflicts may be inherent in, or arise from, the Fund Manager s discretion in providing such opportunities to certain Investors. In addition, once such co-investments are made, the Fund s interests and those of co-investing Investors may subsequently diverge. Prospective investors are strongly advised to conduct their own due diligence including, without limitation, the legal and tax consequences to them of investing in the Fund. The investments described in this document may not be suitable for all investors. Investors are accordingly advised to consult an investment adviser authorised under the Financial Services and Markets Act 2000 and an appropriately qualified professional adviser, prior to investing. General Risks The subscription for Shares in the Investee Companies and the performance of Shares will not be covered by the Financial Services Compensation Scheme or by any other compensation scheme. Prospective investors should not regard the contents of this Information Memorandum as constituting advice relating to legal, taxation or investment matters and are advised to consult their own professional advisers before contemplating any investment or transaction. The information contained in this Information Memorandum makes reference to the current laws concerning EIS Relief, Business Property Relief and Capital Gains Tax Deferral Relief. These levels and bases of relief may be subject to change. The tax reliefs referred to in this Information Memorandum are those currently available and their value depends on individual circumstances. Past performance is not necessarily a guide to future performance and may not necessarily be repeated. You should be aware that Share values and income from them may go down as well as up and you may not get back the amount you originally invested. All statements of opinion and/or belief contained in this document and all views expressed and all projections, forecasts or statements relating to expectations regarding future events or the possible future performance of the Fund represent Foresight s own assessment and interpretation of information available to it as at the date of this document. No representation is made or assurance given that such statements, views, projections or forecasts are correct or that the objectives of the Fund will be achieved. Prospective investors must determine for themselves what reliance (if any) they should place on such statements, views, projections or forecasts and no responsibility is accepted by Foresight in respect thereof. 24

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29 Appendix 1: Taxation EIS Qualifying Companies Each Investee Company in which the Fund invests must initially (i.e. at the time of issue of the Shares) not be listed on a recognised stock exchange (as defined for the purposes of EIS Relief) and there must be no arrangements in place for it to become so listed. In addition, throughout the Three Year Period, it must not be a subsidiary of, or be controlled by, another company. It must either exist to carry on a qualifying trade or else be the parent company of a trading group and there must be no arrangements in existence for the Investee Company to become a subsidiary of, or be controlled by, another company. A trading group is a group in which, directly or indirectly, more than 50% of the shares of each subsidiary are held by another member of the group, but any subsidiary employing any of the money raised by the issue of Shares must be a qualifying 90% subsidiary. Non-qualifying business activities (broadly, investment activities and non-qualifying trades) must not comprise a substantial part of the business of the group as a whole. The qualifying business activity for which the money is raised by the issue of Shares must be a trade carried on by a company wholly or mainly in the UK and the trade must be conducted on a commercial basis and with a view to the realisation of profit. The value of the gross assets of the Investee Company and any subsidiaries must not exceed 7 million immediately before the issue of Shares and 8 million immediately afterwards. The maximum fundraising per Investee Company is restricted to 2 million per year and the maximum number of full-time employees (or full-time equivalent) in the Investee Company at the time of Investment is restricted to fewer than 50. Most types of trades are qualifying trades but the following are excluded: Dealing in land, commodities or futures, or in shares, securities or other financial instruments; dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution, or acting as a wholesaler or retailer of goods of a kind which are collected or held as investments if stock is not actively sold; banking, insurance, money lending, debt factoring, hire purchase financing or other financial activities; leasing, except certain lettings of ships, or receiving royalties or licence fees (subject to certain exceptional cases); providing legal or accountancy services; farming and market gardening; forestry and timber production; property development; shipbuilding; producing coal and/or steel; operating or managing hotels or similar establishments; operating or managing nursing homes and residential care homes; and providing services to a trade consisting of any of the above carried on by a connected person. Finance (No 3) Act 2010 which is expect to come into force in these respects in April 2011 will replace the geographical restriction to carrying on a trade wholly or mainly in the UK with a requirement that an Investee Company issuing the shares under the EIS must have a permanent establishment in the UK. The same legislation also requires that a company must not be in difficulty when shares are issued. A company will not be treated as in difficulty within three years of its formation or if it is able to raise funds from existing shareholders or the market. Shares only qualify for EIS Relief if they are ordinary shares which do not, at any time during the Three Year Period, carry any present or future preferential right to dividends or to an Investee Company s assets on its winding up, or any present or future right to be redeemed. The Accumulator Option will be structured within the articles of association of each Investee Company so that future returns are shared (as between those investors who take their dividends and those who roll up their dividend entitlements) in proportion to the aggregate of (i) the amount of each Investor s initial investment; and (ii) the amount of dividend entitlements which each Investor has rolled up. Such rights within the articles of association of an Investee Company should not constitute preferential rights either as a matter of law, because Investors will subscribe the same class of Shares and so other classes of shares will not be effected by the intra class operation of the Accumulator Option, or as a matter of fact, notwithstanding that some Investors may repeatedly waive their dividends given that those who elect for the Accumulator Option may, at their discretion, switch their election so that they do not roll up their dividends. No Accumulator Option will be exercised in respect of any Shares unless an advance assurance has been obtained from HMRC in relation to an Investment which sanctions the operation of the Accumulator Option. If no such advance assurance(s) can be obtained then the Accumulator Option may not be available for some or all of the Investments made by the fund. Fund Status The Fund has not been approved by HMRC under section 251 of the Income Tax Act. This means that the Investor can obtain EIS Relief in the tax year in which Investments in EIS Qualifying Companies are made by the Fund and in the preceding tax year to the extent that Carry Back Relief is claimed in respect of the Investments. The tax year in which the Fund invests may not be the same as the tax year in which an Investor subscribes to the Fund, notwithstanding the availability of Carry Back Relief, given that the Fund Manager anticipates investing the Fund over the course of the three tax years 2009/10 to 2011/12. Capital Gains Tax Deferral Relief is also given by reference to the dates on which the Fund makes its Investments. When an Investment has been made in an EIS Qualifying Company and that company has been trading for at least four months, the Fund Manager will send Investors an EIS 3 Form. The EIS 3 Form can be used by an Investor to claim EIS Relief in respect of the amount invested in that company. The EIS 3 Form will state the amount of the EIS qualifying investment 27

30 Appendix 1: Taxation the Investor has made through the Fund and is required when claiming EIS Relief through a personal taxation return. EIS Relief must be claimed no later than five years after 31 January following the year of assessment in which the Investment was made. Complying fund (non-mifid) status The Fund is a complying fund within the meaning of Article 2 of the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 and, pursuant to clause 15.2 of the Investor s Agreement, Investors are entitled to the withdrawal rights prescribed by that Article. Accordingly, the Fund is not a collective investment scheme within the meaning of section 235 of the Financial Services and Markets Act Notwithstanding this, as Investors in the Fund will make investments together and their investments will be managed by the Fund Manager on a common basis, the Fund will constitute a collective investment undertaking within the meaning of the Markets in Financial Instruments Directive ( MiFiD ), which came into force in the UK on 1 November Therefore, by virtue of the exemption for collective investment undertakings in article 2.1(h) of MiFiD, the Fund falls outside the ambit of MiFiD. This means, in particular, that the category of Investors in the Fund able to participate in the Fund as professional clients is wider than if the Fund were to fall within the ambit of MiFiD. Dividends Under current legislation, no advance corporation tax is payable by Investee Companies on dividends. Shareholders will receive a notional tax credit on dividends paid, such that basic rate tax payers will have no further tax to pay on the dividend received and higher rate taxpayers will have a liability to pay higher rate tax equivalent to 25% of the amount of the dividend received. EIS Tax Reliefs To obtain the tax reliefs described below, it is necessary to subscribe for Shares in EIS Qualifying Companies and claim the relief. The summary below is based on current law, and gives only a brief outline of the tax reliefs and assumes that the Investor is a 40% taxpayer. It does not set out all the rules which must be met by EIS Qualifying Companies and an Investor. The tax reliefs will only be relevant to Investors who pay UK income tax and/or wish to defer a capital gain. (a) Income Tax Relief Individuals can obtain income tax relief on the amount subscribed for Shares in EIS Qualifying Companies (up to 500,000 in each tax year for all EIS investments) provided they are not connected with any issuing company. Husbands and wives and civil partners can each subscribe up to 500,000. To calculate the relief, the lower rate of tax (currently 20%) is multiplied by the amount subscribed. The relief is given against the individual s income tax liability for the tax year in which the Shares are issued unless the individual makes a Carry Back Relief claim. (b) Carry Back Relief Carry Back Relief claims may be made for amounts subscribed for Shares in EIS Qualifying Companies up to the full amount of 500,000 multiplied by the lower rate of tax to be set against an individual s income tax liability for the tax year preceding that in which Shares are issued, save to the extent that income tax relief has already been claimed under the EIS for the preceding year. (c) Capital Gains Tax Deferral Relief To the extent to which a UK resident Investor (including individuals and certain trustees) subscribes for Shares, he can claim to defer paying tax on all or part of a chargeable gain. The gain may have arisen on the disposal of any asset, or a previously deferred gain may have been brought back into charge. Although there is a limit of 500,000 for income tax relief (see (a) above) and for the exemption from capital gains tax upon a disposal (see (d) below), there is no limit on the amount of EIS Investments which can be used to defer a gain. If the Investor dies whilst still holding Shares, the deferred CGT liability is extinguished entirely. Shares must be issued within one year before and three years after the date of the disposal which gives rise to the gain or the date upon which a previously deferred gain crystallises. The gain is deferred until there is a chargeable event such as a disposal of Shares or an earlier breach of the EIS rules. (d) Capital Gains Tax Exemption Any capital gains realised on a disposal of Shares in an EIS Qualifying Company after the Three Year Period, and on which EIS relief (see (a) above) has been given and not withdrawn, will be capital gains tax-free. Any capital gains realised on a disposal within the Three Year Period will be subject to capital gains tax, but in respect of gains realised after 23 June 2010 the effective rate of CGT is 18% and 28% for individuals (the tax rate used depends on the total amount of the individual s taxable income). (e) Loss Relief against Income or Gains Tax relief is available at any time in respect of any loss realised upon a disposal of Shares in an EIS Qualifying Company on which EIS income tax relief (see (a) above) or Capital Gains Tax Deferral Relief (see (c) above) has been given and not withdrawn. The amount of the loss (after taking account of any income tax relief initially obtained) can be set against the individual s gains in the tax year in which the disposal occurs, or, if not fully used, against gains of a subsequent year. Alternatively, on making a claim, the loss, net of income tax relief, may be set off against the individual s taxable income in either the tax year in which the disposal occurs, or the previous tax year. Inheritance Tax Business Business Property Relief Although not an EIS tax relief as such, an investment in an EIS Qualifying Company should qualify for 100% relief from IHT under current legislation, provided the investment has been held for at least two years and is still held at time of death. There is no upper limit on the amount of IHT Relief which can be claimed. The combined availability of the reliefs referred to above can result in significant tax savings. 28

31 Appendix 1: Taxation Trusts Reliefs are available to UK resident Investors as trustees of discretionary or life interest trusts. Apart from being attractive to individual Investors who are UK resident for tax purposes, the Fund offers excellent tax planning opportunities to trustees of certain trusts. Capital Gains Tax Deferral Relief, as described above, can be claimed on the amount subscribed for Shares in EIS Qualifying Companies against any chargeable gains if the Investment is made within one year before and three years after the date of the disposal which gives rise to the gain or the date upon which a previously deferred gain crystallises. Loss Relief is available under the normal capital loss rules in respect of any losses incurred on Investments made by the Fund. Inheritance Tax: discretionary trusts can benefit from Business Property Relief on EIS Investments made by the Fund, provided they have been held by the trustees for two years. Please note that this is only a condensed summary of the taxation legislation and should not be construed as constituting advice which a potential Investor should obtain from his or her own investment or taxation adviser before applying for an investment in the Fund. The value of any tax reliefs will depend on the individual circumstances of Investors. 29

32 Appendix 2: Investor s Agreement This Agreement sets out the terms and conditions for the Fund 1. Definitions, Construction and Interpretation 1.1 In this Agreement the definitions contained in the Glossary set out in Appendix 3 shall apply. 1.2 Words and expressions defined in the FSA Rules which are not otherwise defined in this Agreement shall, unless the context otherwise requires, have the same meaning in this Agreement. 1.3 Any reference to a statute, statutory instrument or to rules or regulations shall be references to such statute, statutory instrument or rules or regulations as from time to time amended, re-enacted or replaced and to any codification, consolidation, re-enactment or substitution thereof as from time to time in force. 1.4 References to the singular only shall include the plural and vice versa. 1.5 Unless otherwise indicated, references to Clauses shall be to Clauses in this Agreement. 1.6 Headings to Clauses are for convenience only and shall not affect the interpretation of this Agreement. 2. Investing in the Fund 2.1 This Agreement comes into force on the date on which an Investor is notified in writing by the Fund Manager that his Application Form is accepted in respect of the Fund. 2.2 This Agreement enables the Investor to invest in the Fund. The Fund will be a Complying Fund. 2.3 The Investor hereby appoints the Fund Manager, on the terms set out in this Agreement, to manage his Portfolio(s) in the Fund as one of a series of similar Portfolios which together constitute the Fund in which he has invested. The Fund Manager agrees to accept its appointment and obligations on the terms set out in this Agreement. 2.4 The Fund Manager is authorised and regulated by the Financial Services Authority for the conduct of UK business. The Administrator and the Nominee are Associates of the Fund Manager. The Fund Manager is a party to this Agreement in its own right and as agent for and on behalf of the Administrator and the Nominee. 2.5 Under the terms of this Agreement, and in accordance with the FSA conduct of business rules , the Investor does not have the right to cancel arrangements to which this Agreement applies. 2.6 If an application set out in an Application Form is not accepted, the Fund Manager will promptly notify the Investor and return the Subscription enclosed with the Application Form. 2.7 The Investor confirms to the Fund Manager that he wishes to be treated as a professional client in respect of his Portfolio(s) in the Fund. 2.8 The Fund Manager may provide the Services to the Investor on the basis that he is an elective professional client if: (a) the Fund Manager undertakes an adequate assessment of the expertise, experience and knowledge of the Investor that gives reasonable assurance, in the light of the nature of the transactions or services envisaged, that the Investor is capable of making his own investment decisions and understanding the risks involved; (b) the Fund Manager has given the Investor a clear written warning of the protections and investor compensation rights the Investor may lose; and (c) the Investor has stated in writing, in a separate document from this Agreement, that he is aware of the consequences of losing such protections. Such a statement is contained within the Application Form. 2.9 If the Investor has been advised by an authorised intermediary who is able to advise on EIS investments and who completes the final section of the Application Form, the Investor will be treated as having satisfied the above criteria. However, if the Investor has applied directly he will have to complete the form on his investment experience which appears immediately after the Application Form. The information provided by the Investor will be kept confidential by the Fund Manager but it is important to enable the Fund Manager to categorise the Investor as a professional client as required by the FSA. An application to subscribe to the Fund will only be accepted from an Investor if he has been categorised by the Fund Manager as a professional client Once an Investor is treated as a professional client he will lose the protections applicable exclusively to retail clients under the FSA Rules. Certain of the FSA Rules will automatically be limited or modified in their application to the Investor. Certain of the FSA Rules will be capable of modification in their application to the Investor in relation to any business carried out by the Fund Manager under the terms of the Information Memorandum ( the Business ) The following protections will not apply to an Investor in the Fund. The Fund Manager will not be obliged to warn the Investor of the nature of any risks involved in any potential Investments in the Fund. The Fund Manager will not be obliged to disclose to the Investor the basis or amount of its charges for any services the Fund Manager provides to the Investor or on his behalf or the amount of any other income that the Fund Manager may receive from third parties in connection with such services. The Fund Manager will not be obliged to set out any of the prescribed contents, disclosures or risk warnings needed for retail customers in prospectuses, marketing brochures and other non real-time financial promotions material, nor will the Fund Manager be subject to the restrictions that apply to a retail client in relation to unsolicited real-time communications with the Investor. The Fund Manager will not be required to give the Investor the warnings required for retail clients in relation to material which may lead the Investor to deal with or use overseas firms which are not regulated by the Financial Services and Markets Act 2000 nor will the Fund Manager have to satisfy itself that the overseas firm will deal with the Investor in an honest and reliable way. The Fund Manager will also not be required to comply with the FSA Rules relating to restrictions on and the content of direct offer advertisements. 30

33 Appendix 2: Investor s Agreement 2.12 The following rules will be limited or modified in their application to the Investor. The majority of the FSA Rules in relation to the form and content of financial promotions will not be applicable in respect of any financial promotion communicated or approved by the Fund Manager. The Fund Manager will not be required by the FSA to provide the Investor with a periodic statement on the value and composition of his Portfolio in the Fund where the Investor has requested the Fund Manager not to do so or where the Fund Manager has taken reasonable steps to establish that the Investor does not want it The Fund Manager will comply with FSA conduct of business rule 11.2 and take all reasonable steps to obtain, when making investments, the best possible result for an Investor taking into account the following execution factors: price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to making investments. In doing this, the Fund Manager will take into account the following criteria for determining the relative importance of these execution factors: the categorisation of the Investor as a professional client (rather than as a retail client), the characteristics and investment objectives of the Fund as described in the Information Memorandum, the characteristics of the rules of the EIS and the characteristics of the normal commercial practice of the counterparties with which, and the markets in which, the Investee Companies will do business. In particular, the provision by counterparties of guarantees of minimum contractual levels of return may be more important than price in obtaining the best possible execution result in the context of achieving the investment objectives set out in Schedule 1 to this Agreement. If the Investor is reclassified as a retail client, the Fund Manager shall be entitled to terminate this agreement pursuant to clause The Investor should note that he will not be covered by certain protections applicable to retail clients in relation to custody services because, in subscribing to the Fund, the Investor will by the written acknowledgment contained in the Application Form, waive, as he is permitted to do under the FSA Rules, the protections conferred by the client money rules in respect of any money and other assets the Fund Manager holds for the Investor. Accordingly the Fund Manager will not be required necessarily to segregate the Investor s money from that of the Fund Manager. In such circumstances, in the event of insolvency the Investor would rank only as a general creditor of the Fund Manager in respect of any uninvested money. Notwithstanding the foregoing, it is the policy of the Fund Manager to segregate an Investor s money from funds held for or on behalf of the Fund Manager If the Investor has a complaint regarding the Services he may raise the complaint with his independent financial adviser or directly with the Fund Manager by writing to the address shown in the Information Memorandum and the Fund Manager shall endeavour to resolve the complaint speedily and efficiently and will reply to the Investor in writing. As a professional client the Investor may lose the right to access the Financial Ombudsman Service The Fund Manager may have regard to an Investor s expertise when complying with the requirements under the regulatory system that communications must be clear, fair and not misleading Under FSA Rules the Fund Manager has to review its categorisation of clients at least once a year. As part of this review procedure the Administrator may write to the Investor. 3. Subscriptions 3.1 The Investor: (a) must make a Subscription in the Fund of not less than the amount shown in the Application Form at the same time as submitting his Application Form to invest in the Fund; (b) may make further Subscriptions (in multiples of 1,000) up to and including the final Closing Date; and (c) may not make any Subscriptions after the final Closing Date. 3.2 The Investor may make a withdrawal from the Fund and terminate this Agreement pursuant to Clause 15.2 below. 3.3 Subscriptions received shall be deposited (in an interest bearing client account) pursuant to Clause 7.8 pending their investment. 4. Services 4.1 The Fund Manager will manage the Fund as from the first Closing Date on the terms set out in this Agreement. The Fund Manager will exercise all discretionary powers in relation to the selection of, or exercising rights relating to, Investments on the terms set out in this Agreement, including, in particular the negotiation and execution of agreements and ancillary documentation relating to Investments in EIS Qualifying Companies. 4.2 The Fund Manager will also arrange for the provision of administration services in relation to the Fund with the Administrator and the Nominee. 4.3 The Investor hereby authorises the Fund Manager (and grants to the Fund Manager a power of attorney) to act on its behalf and in the name of the Investor or its nominee to negotiate, agree and do all such acts, transactions, agreements and deeds as the Fund Manager may deem necessary or desirable for the purposes of making and managing Investments on behalf of the Investor and this authority (and power of attorney) shall be irrevocable and shall survive, and shall not be affected by, the subsequent death, disability, incapacity, incompetence, termination, bankruptcy, insolvency or dissolution of the Investor. This authority (and power of attorney) (subject to clause 7.6) will terminate upon the complete withdrawal of the Investor from the Fund. 4.4 The Fund Manager, the Administrator and the Nominee shall not except as expressly provided in this Agreement or unless otherwise authorised, have any authority to act on behalf of, or as the agent of the Investor. 31

34 Appendix 2: Investor s Agreement 5. Investment Objectives and Restrictions 5.1 In performing the Services, the Fund Manager shall have regard to and shall comply with the investment objectives and the investment restrictions set out in Schedule 1 to this Agreement. 5.2 In performing the Services, the Fund Manager shall at all times have regard to: (a) the need for an Investor s Portfolio(s) to attract the Tax Advantages in accordance with the investment objectives and restrictions set out in Schedule 1 of this Agreement; and (b) all Applicable Laws. 5.3 In the event of a gradual realisation of Investments prior to termination of the Fund under Clause 15.1, the cash proceeds of realised Investments may be placed on deposit or invested in government securities or in other investments of a similar risk profile. 6. Terms Applicable to Dealing 6.1 In effecting transactions for the Fund, the Fund Manager will act in accordance with the FSA Rules. 6.2 Where relevant, it is agreed that all transactions will be effected in accordance with the rules and regulations of any relevant market, exchange or clearing house (and the Fund Manager shall take all such steps as may be required or permitted by such rules and regulations and/or by good market practice) through which transactions are executed and to all applicable laws so that: (a) if there is any conflict between the provisions of this Agreement and any such rules, customs or applicable laws, the latter shall prevail; and (b) action may be taken as thought fit in order to ensure compliance to any such rules, customs or applicable laws. An Investor should, however, be aware that the Portfolio(s) of an Investor will be invested in a range of unlisted securities and there is generally no relevant market or exchange and consequent rules and customs and there will be varying practices for different securities. Transactions in shares of such securities will be effected on the best commercial terms which can be secured. 6.3 Subject to the FSA Rules, transactions for an Investor will be aggregated with those for other Investors pursuant to clause 6.4. They may also be aggregated with transactions for other customers of the Fund Manager, and of its members, partners, employees and Associates and their employees and, if so, any Investments made pursuant to such transactions will be allocated on a fair and reasonable basis in accordance with the FSA Rules and endeavours will be made to ensure that the aggregation will work to the advantage of each of the Investors, but an Investor should be aware that the effect of aggregation may work on some occasions to an Investor s disadvantage. 6.4 Where transactions for an Investor are aggregated with those for another Investor, the number of Shares in an Investee Company held as an Investment for the Investor shall, as nearly as possible, be in the proportion which the Investor s Subscription bears to the total Subscriptions by all Investors holding Portfolios of the same Set, with Portfolios of one Set being invested in proportion to other Sets of Portfolios being invested in the same Investee Companies provided, however, that depending on the timing of investments, a Portfolio of a later Set may not be invested in the same Investee Companies in which a Portfolio of an earlier Set is invested. Variations may be allowed to prevent Investors having fractions of Shares but only in circumstances in which there can be minor variations. If one or more of the Investors in the Fund is an accountant, lawyer or other professional person who is subject to professional rules preventing him from making an investment in a particular EIS Qualifying Company, then the number of Shares provisionally allocated to that Investor or Investors shall not be acquired for any of his Portfolios in the Fund. Entitlement to Shares will be to the nearest whole Share rounded down and the aggregate of fractional entitlements may be held by the Nominee for the Fund Manager. 6.5 The Fund Manager may make use of soft commission arrangements in respect of transactions undertaken for the Fund as may be disclosed to the Investor from time to time. 6.6 The Fund Manager will act in good faith and with due diligence in its choice and use of counterparties but, subject to this obligation, shall have no responsibility for the performance by any counterparty of its obligations in respect of transactions effected under this Agreement. 6.7 Where an Investor has elected for the Accumulator Option the Fund Manager will on his behalf, if and to the extent that an advance assurance is obtained from HMRC permitting the operation of the Accumulator Option, waive dividends that would otherwise be paid to him by an Investee Company if and to the extent that the articles of association of that Investee Company provide, as between those Investors who take their dividends and those on whose behalf dividends are waived, that future entitlements of Investors to participate in the profits available for distribution from that Investee Company or on a sale of Investments in that Investee Company and to participate in capital returned on a winding up of that Investee Company will be shared in proportion to the aggregate of (i) the amount which each Investor invests in that Investee Company; plus (ii) the amount of all dividends which, but for his waiver of them, would otherwise have been paid to him by that Investee Company. An Investor may at any time by written notice received by the Fund Manager revoke an election for the Accumulator Option (though not with retrospective effect) or reinstate an election previously revoked, or if no election has been made, make such an election. 7. Custody 7.1 The Fund Manager will be responsible for safeguarding the assets within an Investor s Portfolio. The Administrator will be responsible for providing administrative services in relation to the safe keeping of Investments and cash 32

35 Appendix 2: Investor s Agreement comprised in the Fund from time to time, including the settlement of transactions, collection of income and the effecting of other administrative actions in relation to the Investments. 7.2 Investments will be registered in the name of the Nominee. Investments within the Investor s Portfolio in the Fund will be beneficially owned by the Investor at all times but the Nominee will be the legal owner of the Investments in the Fund. The Nominee will not carry on any activity except as instructed by the Fund Manager. 7.3 The Nominee will hold any title documents or documents evidencing title to the Investments. Individual customer entitlements are not identifiable by separate certificates or other physical documents of title or external electronic records. In the event of a default of the Nominee, those for whom it holds securities may share in any shortfall pro rata. The Administrator may deliver or accept delivery of certificates and/or Crest balances on behalf of the Nominee. The Nominee holds the Investments pursuant to a trust under which the interests of customers are created or extinguished when a customer makes acquisitions or disposals in accordance with this Agreement. Pursuant to section 250(1) of the Income Tax Act shares subscribed for, issued to, held by or disposed of for an individual by a nominee are treated for the purposes of the EIS as subscribed for, issued to, held by or disposed of by the individual Investor. The Nominee shall maintain at all times a record sufficient to show the beneficial interest of the Investor in the whole number of Shares allocated to and the cash within his Portfolio. 7.4 Investments or title documents may not be lent to a third party and nor may there be any borrowing against the security of the Investments or such title documents. 7.5 An Investment may be realised in order to discharge an obligation of the Investor under the Agreement, for example in relation to payment of fees, costs and expenses. 7.6 The Administrator will arrange for the Investor to receive details of any meetings of investors in Investments and any other information issued to investors in Investments if the Investor at any time in writing requests such details and information (either specifically in relation to a particular Investment or generally in respect of all Investments). The Investor shall be entitled, as a matter of right, to require the Nominee to appoint the Investor as its proxy to vote as the Investor may see fit at any meeting of shareholders in an Investee Company in which an Investment is held for an Investor. In the case of an Investor who is not validly appointed as the Nominee s proxy for the purposes of a meeting of the shareholders of an Investee Company in which an Investment is held for that Investor, and upon the application of the Fund Manager to the Administrator, the Nominee may (but is not obliged to) appoint the Fund Manager as its proxy to vote at that meeting. In the case of variations in the share capital, receipts of a notice of conversion, or proposal to wind up, amalgamate or take over a company in which an Investment is held for the Investor: (a) a bonus or capitalisation issue will be automatically credited to an Investor s holding; (b) otherwise (where appropriate) the Fund Manager will be sent a summary of the proposal and the required action to be taken (if any); (c) if, on a rights issue, no instruction is received from the Fund Manager, the Nominee will allow the rights to lapse. Lapsed proceeds in excess of 3 will be credited to the Investor. Sums less than this will be retained for the benefit of the Administrator. However, if nil paid rights in a secondary market are acquired for the Investor, such rights will be taken up, unless the Fund Manager provides contrary instructions; (d) all offers will be accepted upon going unconditional whether or not any instructions have been received; and (e) entitlements to Shares will be to the nearest whole Share rounded down and the aggregate of fractional entitlements may be held by the Nominee for the Administrator. If partly paid Shares are held for an Investor and are the subject of a call for any due balance and no instruction is received, the Administrator may sell sufficient of the Investments to meet the call. 7.7 The Investor is responsible for complying with all requirements under the Takeover Code and to notify the FSA and the Takeover Panel of dealings in relevant shares during a takeover or merger. 7.8 The Fund Manager will be responsible for holding cash of the Investor but cash will not be held in accordance with the client money rules of the FSA. The cash balance held for an Investor in the Fund will be deposited with an authorised banking institution in a common account in the name of the Fund Manager with customer trust status together with cash balances belonging to other Investors in the Fund. The Fund Manager may debit or credit the account for all sums payable by or to an Investor (e.g. dividends receivable in cash or amounts payable by the Investor) and make adjustments: (a) in respect of sums received by the Investor otherwise than as a result of credits properly made to the accounts initiated by the Fund Manager under the Investor s Agreement; and (b) to effect settlement in respect of Investments. Share dividends shall not be receivable under this Agreement otherwise than in cash. Interest will be payable on all credit balances on the bank account (including credit balances arising as a result of realisations of Investments) at rates published by the Administrator. Where the Investor forwards a cheque to the Fund Manager for credit to his account, no interest will be credited until the cheque is cleared. 7.9 The Fund Manager may decide to cease to treat as money owed to an Investor any unclaimed cash of an Investor if there has been no movement in the balance in the bank account in a period of six years (notwithstanding any payments or receipts of charges, interest or similar items) and the Fund Manager has taken reasonable steps to contact the Investor and to return the balance. 33

36 Appendix 2: Investor s Agreement 8. Reports and Information 8.1 Contract notes will be provided for each transaction for the Investor. 8.2 The Fund Manager shall send the Investor a report relating to the Fund, complying with the FSA Rules, every six months, in respect of the periods ending on or around 5 April and 5 October. Reports will include a measure of performance in the later stages of the Fund once valuations are available for the Investments. Investments will be valued in accordance with appropriate IPEVC Guidelines from time to time prevailing. 8.3 Details of dividends which are received in respect of the Investments will be provided in respect of each tax year ending 5 April and appropriate statements sent to the Investor within sections 1105(1), (2) and (3) of the Corporation Taxes Act The Fund Manager and the Administrator shall supply such further information which is in its respective possession or under its control as the Investor may reasonably request as soon as reasonably practicable after receipt of such request. 8.5 Any contract notes, statements, reports or information so provided by the Fund Manager or the Administrator to the Investor will state the basis of any valuations of Investments provided. 9. Fees and Expenses The Fund Manager and the Administrator shall receive fees for their Services, and reimbursements of their costs and expenses, as set out in Schedule 2 to this Agreement. The Fund Manager shall be responsible for meeting all fees and expenses of the Nominee. 10. Management and Administration Obligations 10.1 The Fund Manager and the Administrator shall each devote such time and attention and have all necessary competent personnel and equipment as may be required to enable them to provide their respective Services properly and efficiently, and in compliance with the FSA Rules Except as disclosed in the Information Memorandum and as otherwise provided in this Agreement (for example on early termination), neither the Fund Manager nor the Administrator shall take any action which may prejudice the tax position of the Investor insofar as it is aware of the relevant circumstances, and in particular which may prejudice obtaining the Tax Advantages for the Fund Investments. 11. Obligations of the Investor 11.1 A Portfolio of an Investor which is established by this Agreement is set up on the basis of the declaration made by the Investor in his Application Form which includes the following statements by the Investor in relation to his Subscription: (a) the fact as to whether or not the Investor wishes to seek EIS Relief for the Investments in EIS Qualifying Companies; (b) that he agrees to notify the Fund Manager if any Investment is in any company with which the Investor is connected within the meaning of Section 163 and Sections 166 to 177 of the Income Tax Act; (c) that he agrees to notify the Fund Manager if, within three years of the date of issue of Shares by an EIS Qualifying Company, the Investor becomes connected with the company or receives value from such company; (d) that he will provide the Fund Manager with his tax district, tax reference number and National Insurance number; and (e) that he is aware that he is consenting to be treated as an elective professional investor and that the money he subscribes is not to be treated as client money in accordance with the rules of the FSA The Investor confirms that the information stated in the Application Form in these (and all other) respects is true and accurate as at the date of this Agreement The Investor must immediately inform the Fund Manager in writing of any change of tax status, other material change in circumstance and any change in the information provided in the Application Form to which Clause 11.1 above refers In addition, an Investor must provide the Fund Manager with any information which it reasonably requests for the purposes of managing the Investments of the Investor pursuant to the terms of this Agreement. 12. Delegation and Assignment The Fund Manager (and the Administrator where reasonable and as may be agreed with the Fund Manager) may employ agents and subcontractors, including Associates, to perform any administrative, custodial or ancillary services to assist the Fund Manager in performing its Services, in which case it will act in good faith and with due diligence in the selection, use and monitoring of agents. Any such employment of agents shall not affect the liability of the Fund Manager (or the Administrator where appropriate) under the terms of this Agreement. 13. Potential Conflicts of Interest and Disclosure 13.1 The Fund Manager and the Administrator may provide similar services or any other services whatsoever to any customer and neither the Fund Manager nor the Administrator shall in any circumstance be required to account to the Investor for any profits earned in connection therewith. So far as is deemed practicable by the Fund Manager or the Administrator, the Fund Manager or the Administrator will use all reasonable endeavours to ensure fair treatment as between the Investor and such customers in compliance with the FSA Rules. 34

37 Appendix 2: Investor s Agreement 13.2 The Fund Manager, and any Associate may, subject to FSA Rules and without prior reference to the Investor, recommend transactions in which it or an Associate has, directly or indirectly, a material interest or a relationship of any description with another party, which may involve a potential conflict with its duty to the Investor. Neither the Fund Manager, nor any Associate, shall be liable to account to the Investor for any profit, commission or remuneration made or received from or by reason of such transactions or any connected transactions. For example, such potential conflicting interests or duties may arise because: (a) the Fund Manager or an Associate may receive remuneration or other benefits by reason of acting in corporate finance or similar transactions involving companies whose securities are held for the Investor; (b) the Fund Manager may take an equity stake in a company whose securities are held for the Investor at a price not below the issue price available to the Investor subject to subparagraph (c) below; (c) the Fund Manager s entitlement to the performance incentive described in Schedule 2 of this Agreement may be obtained by subscriptions for Shares by or on behalf of the Fund Manager and its directors, members, partners, employees, Associates and others with whom the Fund Manager may share such entitlement. Those Shares may be subscribed at a price below the issue price available to the Investor and may dilute the returns to the Investor but only to the extent of the value of the performance incentive and subject to the conditions described in Schedule 2; (d) the Fund Manager or an Associate provides investment services for other customers; (e) any of the Fund Manager s directors, members, partners, employees or Associates or their employees, is or may become a director of, holds or deals in securities of, or is otherwise interested in any company whose securities are held or dealt in on behalf of the Investor; (f) the transaction is in securities issued by an Associate or the customer of an Associate; (g) the transaction is in relation to an Investment in respect of which the Fund Manager or an Associate may benefit from a commission of fee payable otherwise than by the Investor and/or it or an Associate may also be remunerated by the counterparty to any such transaction; (h) the Fund Manager deals on behalf of the Investor with an Associate; (i) the Fund Manager may act as agent for the Investor in relation to a transaction in which it is also acting as agent for the account of other customers and Associates; (j) the Fund Manager may, in exceptional circumstances, deal in investments as principal in respect of a transaction for the Investor; (k) the Fund Manager may have regard, in exercising its management discretion, to the relative performance of other funds under its management; (l) the Fund Manager may effect transactions involving placings and/or new issues with an Associate who may be acting as principal or receiving agent s commission. The Fund Manager or an Associate may retain any agent s commission or discount or other benefit (including directors fees) that accrues to them; (m) the transaction is in the securities of a company for which the Fund Manager or an Associate has underwritten, managed or arranged an issue within the period of 12 months before the date of the transaction; or (n) the transaction is in securities in respect of which the Fund Manager, or a member, partner or employee of the Fund Manager or an Associate or its employees, is contemporaneously trading or has traded on its own account or has either a long or short position. 14. Liability 14.1 The Fund Manager agrees, for itself and as agent for the Administrator that each of them will at all times act in good faith and with reasonable care and due diligence. Nothing in this paragraph 14 shall exclude any duty or liability owed by the Investor under the FSA Rules The Fund Manager shall not be liable for any loss to the Investor arising from any investment decision made in accordance with the investment objectives and the investment restrictions set out in Schedule 1 to this Agreement or for other action in accordance with this Agreement, except to the extent that such loss is directly due to the negligence or wilful default or fraud of the Fund Manager or any of its members, partners or employees The Fund Manager accepts responsibility for holdings of Shares in the name of the Nominee and for the acts and omissions of the Nominee, provided, however, that the Fund Manager shall not be liable for any loss to the Investor arising from any action it takes in accordance with this Agreement, except to the extent that such loss is directly due to the negligence or wilful default or fraud of the Fund Manager or any of its members, partners or employees Subject to Clauses 6.6 and 12, the Fund Manager shall not be liable for any defaults of any counterparty, agent, banker, nominee or other person or entity which holds money, investments or documents of title for the Fund, other than where such party is an Associate In the event of any failure, interruption or delay in the performance of the Fund Manager s or the Administrator s respective obligations resulting from acts, events or circumstances not reasonably within its control (including but not limited to acts or regulations of any governmental or supranational bodies or authorities) or breakdown, failure or malfunction of any telecommunications or computer service or systems, the Investor acknowledges that neither the Fund Manager nor the Administrator, as appropriate, shall be liable or have any responsibility of any kind for any loss or damage thereby incurred or suffered by the Investor The Fund Manager gives no representations or warranty as to the performance of the Fund. Investments are high risk investments, being non-readily Realisable Investments. There is a restricted market for such Investments and it may therefore be difficult to sell the Investments or to obtain reliable information about their value. Investors should consider the suitability of the investment objectives and restrictions set out in Schedule 1 of this Agreement carefully and note the risk warnings set out in the Information Memorandum. Nothing in this Clause 14 shall exclude the liability of the Fund Manager for its own fraud. 35

38 Appendix 2: Investor s Agreement Termination 15.1 The Fund Manager will seek to realise Investments and to terminate the Fund in an orderly fashion over a period of six years from the final Closing Date but it cannot be guaranteed that Investments made can be easily realised within this period and, even where they can be realised, that this can be done on an advantageous basis. On termination of the Fund, the Fund Manager shall endeavour to procure that all Shares in the Investor s Portfolio will be sold or transferred into the Investor s name or as the Investor may otherwise direct. Any cash within the Investor s Portfolio will be paid to the Investor An Investor is entitled to make withdrawals of Shares in his Portfolio at any time after the end of the period of seven years beginning with the date on which the Shares in question were issued. An Investor is entitled to withdraw cash in his Portfolio at any time. The Fund Manager will have a lien on all assets being withdrawn or distributed from the Fund and shall be entitled to dispose of some or all of the same and apply the proceeds in discharging any liability (including for any accrual of the performance incentive) of the Investor to the Fund Manager. This Agreement shall terminate upon the completion of the withdrawal from the Fund of all shares and cash which the Investor is entitled to receive under this clause The balance of any sale proceeds and control of any remaining Investments will then be passed to an Investor If: (a) the Fund Manager gives to the Investor not less than three months written notice of its intention to terminate its role as Fund Manager under this Agreement; (b) the Fund Manager ceases to be appropriately authorised by the FSA or becomes insolvent; or (c) the Fund Manager is no longer able to categorise the Investor as a professional client under the FSA Rules; the Fund Manager shall endeavour to make arrangements to transfer the Investments to another fund manager, in which case that fund manager shall assume the role of the Fund Manager under this Agreement, failing which the Agreement shall terminate forthwith and, subject to Clause 16, the Investments held for the account of the Investor shall be transferred into the Investor s name or as the Investor may otherwise direct. 16 Consequences of Termination 16.1 On termination of this Agreement pursuant to Clause 15, the Fund Manager will use reasonable endeavours to complete all transactions in progress at termination expeditiously on the basis set out in this Agreement Termination will not affect accrued rights, existing commitments or any contractual provision intended to survive termination and will be without penalty or other additional payments save that the Investor will pay fees, expenses and costs properly incurred by the Manager and the Administrator (including a fair amount determined by the Fund Manager in compensation for accrued performance incentive not obtained by subscriptions for Shares) up to and including the date of termination and payable under the terms of this Agreement On termination, the Fund Manager may retain and/or realise such Investments as may be required to settle transactions already initiated and to pay the Investor s outstanding liabilities, including fees, costs and expenses payable under Clause 9 of this Agreement (including a fair amount determined by the Fund Manager in compensation for accrued performance incentive not obtained by subscriptions for Shares), the details of which are set out in Schedule 2 to this Agreement. 17 Confidential Information 17.1 None of the Fund Manager, the Administrator or the Investor shall disclose to third parties or take into consideration for purposes unrelated to the Fund information either: (a) the disclosure of which by it would be or might be a breach of duty or confidence to any other person; or (b) which comes to the notice of a partner or member of or an employee, officer or agent of the Fund Manager or the Administrator or of any Associate but properly does not come to the actual notice of that party providing services under this Agreement Each of the Fund Manager and the Administrator will at all times keep confidential all information acquired in consequence of the Services, except for information which: (a) is in the public knowledge; or (b) which they may be entitled or bound to disclose under compulsion of law; or (c) is requested by regulatory agencies; or (d) is given to their professional advisers where reasonably necessary for the performance of their professional services; or (e) which is authorised to be disclosed by the relevant party; and shall use all reasonable endeavours to prevent any breach of this Clause The Administrator may verify the Investor s identity and assess the Investor s financial standing. In doing so, a credit reference agency may be consulted which will record a search. 18 Complaints and Compensation 18.1 The Fund Manager has established procedures in accordance with the FSA Rules for consideration of complaints. Details of these procedures are available from it on request. Should an Investor have a complaint, he should contact the Fund Manager The protections offered by the FSA do not apply to the Fund or the Investments of the Investor and compensation under the UK Investor Compensation Scheme will not be available. 19 Notices, Instructions and Communications 19.1 Notices of instructions to the Fund Manager or the Administrator should be in writing and signed by the Investor, except as otherwise specifically indicated.

39 Appendix 2: Investor s Agreement 19.2 The Fund Manager or the Administrator may rely and act on any instruction or communication which purports to have been given by persons authorised to give instructions by the Investor under the Application Form or subsequently notified by the Investor from time to time and, unless that relevant party receives written notice to the contrary, whether or not the authority of such person shall have been terminated All communications to the Investor shall be sent (whether postal or electronic) to the latest address notified by the Investor to the Fund Manager or the Administrator and shall be deemed received by the Investor on the second day after posting or on the day after dispatch in the case of electronic communication. All communications by the Investor shall be made in writing or (save as otherwise provided) shall be made by telephone to the Fund Manager or the Administrator, in which case conversations may be recorded for the avoidance of any subsequent doubt. Communications sent by the Investor will be deemed received only if actually received by the Fund Manager or the Administrator. Neither the Fund Manager nor the Administrator will be liable for any delay or failure of delivery (for whatever reason) of any communication sent to the Investor. 24 Rights of Third Parties A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement, but this does not affect any right or remedy of such third party which exists or is available apart from that Act. 25 Severability If any term, condition or provision of this Agreement shall be held to be invalid, unlawful or unenforceable to any extent, such term, condition or provision shall not affect the validity, legality or enforceability of the remainder of this Agreement. 26 Governing Law This Agreement and all matters relating thereto shall be governed by and construed in accordance with English Law and the parties submit to the non-exclusive jurisdiction of the English Courts. 20 Unsolicited real-time financial promotion The Fund Manager may communicate an unsolicited realtime financial promotion (i.e. interactive communications such as a telephone call or electronic mail promoting Investments) to the Investor. 21 Amendments The Fund Manager may amend the terms and conditions in this Agreement by giving the Investor not less than 10 business days written notice. The Fund Manager may also amend these terms by giving the Investor written notice with immediate effect if such is necessary in order to comply with HMRC requirements, in order to maintain the EIS Relief or in order to comply with the FSA Rules. 22 Data protection All data which the Investor provides to the Fund Manager and the Administrator is held by that party subject to the Data Protection Act The Investor agrees that the Fund Manager and the Administrator may pass personal data to each other and to other parties insofar as is necessary in order for them to provide their Services as set out in this Agreement and to the FSA and any regulatory authority which regulates them and in accordance with all other Applicable Laws. 23 Entire agreement This Agreement, together with the Application Form, comprises the entire agreement of the Fund Manager and its Associates with the Investor relating to the provision of the Services. 37

40 Appendix 2: Investor s Agreement Schedule 1 Investment Objectives and Restrictions Investment Objectives of the Fund 1 To generate capital gains and to provide Investors with the Tax Advantages associated with EIS Investments. 2 At least 80% by cost of Investments shall be in Shares which entitle Investors to the reliefs from taxation available under the EIS subject to their personal circumstances. Investment Restrictions of the Fund 1 In carrying out its duties hereunder in respect of the Fund, regard shall be had, and all reasonable steps taken, by the Fund Manager to comply with such policies or restrictions as are required in respect of EIS Investments in order to attract the reliefs from taxation under the EIS as may be prescribed by HMRC from time to time. 2 In particular, but without prejudice to the generality of the above statements, the restrictions for the Fund are as follows: (a) No more than 25% of the Subscription of an Investor will be invested in any one Investee Company; (b) Investors should be aware that the Fund s Investments will include non-readily Realisable Investments. There is a restricted market for such Investments and it may therefore be difficult to deal in the Investments or to obtain reliable information about their value; (c) in the event of a gradual realisation of Investments prior to termination of the Fund under Clause 15.1, the cash proceeds of realised EIS investments may be placed on deposit or invested in fixed interest government securities or other investments of a similar risk profile. Proceeds will be paid out on termination of the Fund or in instalments in advance of termination, as determined by the Fund Manager. Schedule 2 1 Fees and Expenses in respect of the Fund The charges described below are payable by Investee Companies and not directly by the Fund or the Investor save in the event of a withdrawal as noted in paragraph 4 below. The percentages shown below will be applied to the amount invested by the Fund in each Investee Company. The charges will accrue from 1 April 2011 and will be payable quarterly in advance from the date of investment in the relevant Investee Company. VAT will be added where applicable. 2 Fundraising Charges Initial charge 5.5% Annual trail commission 0.5% The Fund Manager will receive the initial charge and will pay all costs of establishing the Fund, including introductory commission to authorised financial advisers, all legal and taxation costs incurred in creating the Fund, the preparation and issue of this document and any other direct expenses wholly incurred in establishing the Fund. Annual trail commission will be paid to the Investor s authorised financial adviser, if any, for up to six years and is capped at 3% of the amount the Investor subscribes to the Fund. The administration of annual trail commission will be managed by Foresight Fund Managers Limited which will maintain a register of advisers entitled to trail commission. If the Investor changes his adviser, he should inform Foresight Fund Managers Limited of the details of his new adviser, who will be entitled to receive the annual trail commission instead. Advisers should keep a record of Application Forms submitted bearing their stamp to substantiate any claim for Annual trail commission. 3 Fund Management Charges Annual management charge 1.5% Secretarial charge 0.3% (subject to an index linked minimum of 60,000 in aggregate) Foresight will bear any legal, accounting and other fees incurred by the Fund in connection with potential Investments which do not proceed to completion and may retain for its own benefit any arrangement fees and director s or monitoring fees which it receives in connection with Investments. 4 Performance Incentive Foresight will be entitled to a performance incentive fee, payable from the proceeds of realising the Fund s assets. This fee is only payable once an Investor has received proceeds of at least 1 per 1 invested. The performance incentive fee is calculated as 20% of distributions to the Investor in excess of 1 per 1 invested until total distributions reach 130p per 1 invested and 30% above that level. The performance incentive may be obtained by subscriptions for Shares by or on behalf of the Fund Manager and its directors, employees and Associates or as a charge deducted from realisation proceeds due to the Investor. In the event of the Investor making a withdrawal of Shares pursuant to Clause 15.2 the Investor shall be liable for a charge equal to a fair amount determined by the Fund Manager in compensation for accrued performance incentive not obtained by subscriptions for Shares. 5 Expenses The Fund Manager shall be entitled to charge each Investee Company a pro-rata proportion of expenses reasonably incurred by the Manager in respect of the administration of the Fund. 6 Interest pending investment Interest earned on cash balances held for the Investor in the Fund will be added to the Investor s Portfolio. 38

41 39

42 Appendix 3: Glossary 40 In this document these expressions and abbreviations have the following meanings unless the context otherwise requires. Accumulator Option the option exercisable by completing the appropriate box on the Application Form or otherwise by notice in writing to Foresight to authorise Foresight on behalf of the Investor to waive dividends that would otherwise be paid by an Investee Company if and to the extent that, with the sanction of an advance assurance from HMRC, the articles of association of that Investee Company provide, as between those Investors who take their dividends and those who waive their dividend entitlements, that future entitlements to participate in the profits available for distribution from that Investee Company or on a sale of Investments in that Investee Company and to participate in capital returned on a winding up of that Investee Company will be shared in proportion to the aggregate of (i) the amount which each Investor invests that Investee Company; plus (ii) the amount of all dividends which, but for his waiver of them, would otherwise have been paid to him by that Investee Company. Administrator Foresight Fund Managers Limited or (subject to prior notification to Investors) such other person as the Fund Manager may appoint to provide, safe custody and, on behalf of the Fund Manager, administration services in respect of the Fund; AIM the Alternative Investment Market of the London Stock Exchange; Applicable Laws all relevant UK laws, regulations and rules, including those of any government or of the FSA; Application Form an application form to invest in the Fund completed by a prospective Investor in the form provided by the Fund Manager; Associate any person or entity which (whether directly or indirectly) controls or is controlled by the Fund Manager (for the purpose of this definition control shall refer to the ability to exercise significant influence over the operating or financial policies of any person or entity); Business Property Relief relief from IHT pursuant to sections Inheritance Tax Act 1984; Capital Gains Tax Deferral Relief relief by way of deferral of CGT (Section 150C and Schedule 5B of the Taxation of Chargeable Gains Act 1992); Carry Back Relief income tax relief for the full amount of an investment in an EIS Qualifying Company up to 500,000, multiplied by the lower rate of tax and set against an individual s income tax liability for the tax year preceding that in which Shares are issued, save to the extent that income tax relief has already been claimed under the EIS for the preceding year; Complying Fund a complying fund within the meaning of Article 2 of the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001; CGT capital gains tax; Closing Date a date by which Subscriptions may be accepted by the Fund Manager for the creation of Portfolios; Corporate Venturing Scheme The Corporate Venturing Scheme as set out in Schedule 15 Finance Act 2000; EIS Enterprise Investment Scheme, as set out in the Income Tax Act; EIS Qualifying Company a company that meets the EIS requirements regarding EIS Relief and Capital Gains Deferral Relief; EIS Relief relief from income tax under EIS; Feed-in-Tariffs various government-regulated prices to producers of qualifying renewable electricity for varying periods (25 years for qualifying Solar Power Systems under the FIT Scheme in the UK); Fees and Expenses the fees and expenses set out in Schedule 2 to the Investor s Agreement; FIT Scheme the UK Scheme for Feed-in-Tariffs introduced in 2010 in accordance with sections 41 to 43 of the Energy Act 2008; Foresight or Fund Manager Foresight Group CI Limited (a private company registered in Guernsey under company number 51471, incorporated on 12 February 2010 and whose registered office is at La Plaiderie House, La Plaiderie, St Peter Port, Guernsey GY1 4HE) except where the context refers expressly or by implication to Foresight Group LLP and except where the acts, obligations and activities attributed to Foresight or the Fund Manager are regulated by the FSA in which event the reference is to Foresight Group LLP; FSA the Financial Services Authority; FSA Rules the FSA s rules made under powers given to the FSA by the Financial Services and Markets Act 2000; Fund the which describes the aggregate of all the Investors Agreements;

43 Appendix 3: Glossary HMRC IHT hm Revenue & Customs; inheritance Tax; Income Tax Act income Tax Act 2007; Individual Roll Over Option The Individual Roll Over Option described on page 10; Information Memorandum Intermediary Investee Company Investment Investor Investor s Agreement IPEVC Guidelines Loss Relief Net Asset Value Nominee PLUS Portfolio Readily Realisable Investment Services Set Shares Solar Power Systems Subscription Tax Advantages Three Year Period Total Return this document; a person/company who promotes and markets the Fund and arranges the investment for the Investor; a Company in which the Fund invests; investment made through the Fund; an individual (and certain trustees) who complete(s) an Application Form in the form enclosed with this Information Memorandum which is accepted by the Fund Manager and so enters into an Investor s Agreement and invests through the Fund; an Investor s agreement to be entered into by each Investor, in the terms set out in Appendix 2 of this Information Memorandum; the International Private Equity and Venture Capital Valuation Guidelines; relief in respect of income tax for allowable losses pursuant to section 131 of the Income Tax Act; the value of the net assets attributable to Shares as determined from the audited annual accounts of the Investee Companies Foresight Fund Managers Limited or a wholly owned subsidiary of the Fund Manager or such other nominee as may be appointed by the Fund Manager from time to time to be the registered holder of Investments; the market for trading in unquoted securities operated by PLUS Markets Group plc; the monies an Investor subscribes to the Fund on or before a Closing Date plus all Investments made through the Fund which are allocated to an Investor and registered in the name of the Nominee on his behalf and which are subscribed out of such monies plus all income and capital profits arising therefrom; and so that, where an Investor subscribes more than once in the Fund: (i) all Subscriptions made within a single period which falls between two Closing Dates shall be regarded as part of the same Portfolio; and (ii) Subscriptions which are made within periods which fall between three or more Closing Dates shall be regarded as separate Portfolios of that Investor; a government or public security denominated in the currency of the country of its issuer or any other security which is admitted to official listing on an Exchange in an EEA State, regularly traded on or under the rules of such an Exchange, or regularly traded on or under the rules of a recognised investment exchange or (except in relation to unsolicited realtime financial promotions) designated investment exchange, or a newly issued security which can reasonably be expected to fall within the above categories when it begins to be traded (this term does not include AIM or PLUS traded investments, nor does it include unlisted securities); the services provided under Clause 4 of the Investor s Agreement; portfolios created from Subscriptions accepted by the Fund Manager on or before the same Closing Date; shares in an Investee Company subscribed for by the Fund on behalf of Investors; a system which produces electricity from daylight; a subscription to the Fund by way of an Application Form pursuant to Clause 3 of the Investor s Agreement; the various tax advantages, including EIS Relief, arising from Investments in Shares in EIS Qualifying Companies; the period beginning on the date the Shares in an Investee Company are issued and ending three years after that date, or three years after the commencement of the Investee Company s trade, whichever is later; and, the aggregate value of an investment or collection of investments comprising net asset value, valued where appropriate in accordance with IPEVC Guidelines, plus the aggregate of all distributions (both revenue and capital) made. 41

44 Application Forms, Advisor s Certificate and Schedule Application Form and Important Note This Application Form incorporates by reference the Information Memorandum. Unless otherwise stated or as the context shall otherwise require, defined terms and expressions used in this Application Form have the meanings ascribed to them in the Information Memorandum. The minimum investment is 10,000. Who can apply? You can apply for an investment in the if you can be categorised by the Fund Manager as a professional client under the rules of the Financial Services Authority. A prospective investor can be categorised as a professional client if it is a per se professional client within the meaning of the FSA s conduct of business sourcebook rule COBS or if Foresight is satisfied that the prospective investor can be treated as an elective professional client in accordance with the FSA s conduct of business sourcebook rule COBS and thus as a person who is capable of making its own investment decisions and understanding the risks involved, has received a clear written warning of the protections and investor compensation rights it may lose and has stated in writing, in a separate document, that it is aware of the consequences of losing such protections. Confirmation by an authorised intermediary will normally be sufficient to satisfy Foresight. Alternatively, the prospective investor will need to provide evidence of his or her investment experience. Independent Financial Advice, Assessment and Customer Due Diligence Procedures You must arrange for an independent financial adviser, authorised by the Financial Services Authority, to carry out: (i) the assessment required to enable you to be categorised as an elective professional client (unless you can be categorised as a per se professional client); and (ii) the customer due diligence procedures required by The Money Laundering Regulations 2007 within the guidance for the UK Financial Sector issued by the Joint Money Laundering Steering Group. Your independent financial adviser must provide the certificate requested on page 47. Instructions for Completing this Application Form Before completing this Application Form, please carefully review the following documents: the Information Memorandum; and the Investor s Agreement. Then follow the steps listed 1-5 below. 1. Please complete the form in type or use BLOCK CAPITALS (save for your signature) in black/blue permanent ink, and sign any changes you make. Do not erase any text or use white-out. If you have any queries, please contact Foresight on Arrange for an independent financial adviser, authorised by the Financial Services Authority, to carry out the assessments and customer due diligence measures referred to above and to execute the certificate on page 47. If you do not have an independant financial advisor, please complete the assessment form on page 43 so that we can satisfy ourselves that you are elegible to be categorised as a professional client. If you are not applying through an independent financial adviser and your application is for the Sterling equivalent of Euro 15,000 or more (or is one of a series of linked applications the value of which exceeds the amount) the verification requirements of the Money Laundering Regulations will apply and verification of the identity of the applicant (and if a cheque is drawn by a third party) is required and you must ensure that the following documents are enclosed with your Application Form: A certified copy of either the passport or the driving licence of the applicant (and cheque payer if different); and An original bank or building society statement or utility bill (no more than 3 months old), or recent tax bill, in the name of the applicant (and cheque payer if different). Copies should be certified by a solicitor or bank. Original documents will be returned by post at your own risk. 3. Execute and date this Application Form on page 43 or page Send the entire Application Form by post to Foresight using the following address: Foresight Group LLP ECA Court, South Park Sevenoaks, Kent, TN13 1DU 5. Retain a copy of the completed Application Form. 42

45 Application Form Private Investors Before completing this Application Form you should read the Acknowledgements and Representations and make the appropriate deletion in the first bullet point in paragraph n over the page. Once completed in full, please attach your cheque made payable to Foresight Group LLP and send by post to Foresight Group LLP, ECA Court, South Park, Sevenoaks, Kent, TN13 1DU. Foresight will decide, in its absolute discretion, to accept or reject the application and will notify you of its decision. No Application Form will be accepted by Foresight until it has issued a written confirmation of acceptance. Please complete the following Title: Surname(s): Nationality: Forenames: date of Birth: town & Country of Birth: Permanent Residential Address: post Code: Daytime Phone: National Insurance No: tax District: tax Ref No: Length of occupation at the above address: If the length of occupation is not more than 3 years then please provide your previous residential address: post Code: Please tick the appropriate Box Accumulator Option Income Option invest In the I hereby apply to invest (In figures) in the (In Words) Signature: please print name: date: By completing and signing this Application Form, you confirm that your identity may be verified by electronic means such as the use of data held by specialised data agencies. 43

46 Acknowledgements and representations a If your application is accepted, you agree to observe, perform and be bound by the provisions of the Investor s Agreement. b You confirm that you personally possess sufficient knowledge, experience and expertise in financial and business matters (including experience with investments of a similar nature to an investment in the Fund) to be capable of evaluating the merits and risks of an investment in the Fund. c You, if investing as an elective professional client, confirm that you wish to invest as an elective professional client under the rules of the FSA and that you are aware of the consequences of losing the protection and investor compensation rights that you lose by participating in the Fund as an elective professional client. d You waive the protections conferred by the client money rules in respect of any money the Fund Manager holds for you. In doing so you acknowledge that the Fund Manager will not be required necessarily to segregate your money from that of the Fund Manager and that in the event of insolvency you would rank only as a general creditor of the Fund Manager in respect of any uninvested money. Notwithstanding the foregoing you acknowledge that it is the policy of the Fund Manager to segregate Investors money from funds held for or on behalf of the Fund Manager. e You represent and warrant that (a) if it is a trust, it is duly authorised and qualified to invest in the Fund and the individual or individuals signing this Application Form on its behalf have been duly authorised by it to do so or; (b) if you are an individual, that you have reached the age of majority under the laws of your country of nationality or domicile; and, in the case of a trust or an individual, this application, upon acceptance by the Fund Manager, will be its or your legal, valid and binding obligation, enforceable against it or you in accordance with the terms of the Investor Agreement. f You acknowledge that this Application Form is not transferable or assignable. g You confirm your agreement that this Application Form be governed by and construed in accordance with the laws of England and Wales and that the courts of England and Wales shall have exclusive jurisdiction to hear and determine any suit, action or proceedings and to settle any disputes which may arise out of or in connection with this Application Form and, for such purposes, you irrevocably submit to the jurisdiction of such courts. In addition, you irrevocably waive any objection which you might now or hereafter have to the courts of England and Wales being nominated as the forum to hear and determine any such suit, action or proceedings and to settle any such disputes, and agree not to claim that any such court is not a convenient or appropriate forum. h You confirm that you will, at the request of the Fund Manager, forthwith enter into and execute such formal deeds of adherence whereby you will agree to observe, perform and be bound by the provisions of the Investor s Agreement as the Fund Manager may require. i j You agree that by the execution of this Application Form, you grant to the Fund Manager a power of attorney to make, execute, sign, acknowledge, swear to, deliver, record and file as your attorney and on your behalf: any other business certificate or other instrument or document of any kind that the Fund Manager deems necessary or desirable to accomplish the business, purpose and objectives of the Fund, and that is required by any applicable law; any agreement or instrument which the Fund Manager deems appropriate to (i) admit you as an Investor in the Fund in accordance with the terms of the Investor s Agreement; (ii) effect the addition, substitution or removal of the Fund Manager pursuant to the Investor s Agreement; or (iii) effect an amendment or modification to the Investor s Agreement adopted in accordance with the terms of the Investor s Agreement; provided always, to the fullest extent permitted by law, this power of attorney is irrevocable and shall survive, and shall not be affected by, your subsequent death, disability, incapacity, incompetence, termination, bankruptcy, insolvency or dissolution. This power of attorney will only terminate upon your complete withdrawal from the Fund. You agree that the foregoing representations, warranties, agreements and acknowledgments shall survive the date of your admission to the Fund and this Application Form shall be binding upon and inure to the benefit of the parties and their successors and permitted assignees. k You agree that if this application is made by more than one person, your obligations shall be joint and several and the representations, warranties, agreements and acknowledgments herein shall be deemed to be made by and be binding upon such persons and their successors and assignees. l You agree that any term or provision of this Application Form which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Application Form or affecting the validity or enforceability of any of the terms or provisions of this Application Form in any other jurisdiction. m You undertake to notify the Fund Manager immediately if there are ever relevant circumstances of which the Fund Manager should be aware in relation to managing your Portfolio(s). n You confirm, in relation to your investment in the Fund, that: you wish / do not * wish to seek EIS Relief; ( *delete as appropriate) you are applying on your own behalf; you will notify the Fund Manager of any Investment with which you are connected within section 163 and sections 166 to 177 of the Income Tax Act; and you will notify the Fund Manager if, within three years of the date of issue of Shares by an EIS Qualifying Company, you become connected with that EIS Qualifying Company or receive value from it. 44

47 Application Form Trustees ( The Company ) Before completing this Application Form you should read the Acknowledgements and Representations over the page. Once completed in full, please attach your cheque made payable to Foresight Group LLP and send by post to Foresight Group LLP, ECA Court, South Park, Sevenoaks, Kent, TN13 1DU. Foresight will decide, in its absolute discretion, to accept or reject the application and will notify you of its decision. No Application Form will be accepted by Foresight until it has issued a written confirmation of acceptance. IF YOU DO NOT RECEIVE AN ACKNOWLEDGEMENT OF YOUR APPLICATION WITHIN 10 DAYS OF SENDING IT TO FORESIGHT, PLEASE CONTACT FORESIGHT ON Trusts If the application is by a trust, please provide the following information: Full Name: Nature and purpose of the trust (e.g. discretionary, testamentary, bare): Country of establishment: Names of all trustees: Name and address of any protector or controller: post Code: Name and address of any protector or controller: If the trustees are regulated in the UK, please state the name of the regulator: (Otherwise please provide a Certified Copy of the trust deed) Signature: Please provide: A Certified Copy of the mandate form or trustee resolution listing the trustees (or equivalent) with authority to give the Fund Manager instructions concerning the use or transfer of assets; and Constitutional documents for any corporate trustee. invest In the You hereby apply to invest (In figures) in the (In Words) Signature: please print name: date: 45

48 Acknowledgements and representations a If your application is accepted, you agree to observe, perform and be bound by the provisions of the Investor s Agreement. b You confirm that you personally possess sufficient knowledge, experience and expertise in financial and business matters (including experience with investments of a similar nature to an investment in the Fund) to be capable of evaluating the merits and risks of an investment in the Fund. c You, if investing as an elective professional client, confirm that you wish to invest as an elective professional client under the rules of the FSA and that you are aware of the consequences of losing the protection and investor compensation rights that you lose by participating in the Fund as an elective professional client. d You waive the protections conferred by the client money rules in respect of any money the Fund Manager holds for you. In doing so you acknowledge that the Fund Manager will not be required necessarily to segregate your money from that of the Fund Manager and that in the event of insolvency you would rank only as a general creditor of the Fund Manager in respect of any uninvested money. Notwithstanding the foregoing you acknowledge that it is the policy of the Fund Manager to segregate Investors money from funds held for or on behalf of the Fund Manager. e You represent and warrant that (a) if it is a trust, it is duly authorised and qualified to invest in the Fund and the individual or individuals signing this Application Form on its behalf have been duly authorised by it to do so or; (b) if you are an individual, that you have reached the age of majority under the laws of your country of nationality or domicile; and, in the case of a trust or an individual, this application, upon acceptance by the Fund Manager, will be its or your legal, valid and binding obligation, enforceable against it or you in accordance with the terms of the Investor Agreement. f You acknowledge that this Application Form is not transferable or assignable. g You confirm your agreement that this Application Form be governed by and construed in accordance with the laws of England and Wales and that the courts of England and Wales shall have exclusive jurisdiction to hear and determine any suit, action or proceedings and to settle any disputes which may arise out of or in connection with this Application Form and, for such purposes, you irrevocably submit to the jurisdiction of such courts. In addition, you irrevocably waive any objection which you might now or hereafter have to the courts of England and Wales being nominated as the forum to hear and determine any such suit, action or proceedings and to settle any such disputes, and agree not to claim that any such court is not a convenient or appropriate forum. h You confirm that you will, at the request of the Fund Manager, forthwith enter into and execute such formal deeds of adherence whereby you will agree to observe, perform and be bound by the provisions of the Investor s Agreement as the Fund Manager may require. i j You agree that by the execution of this Application Form, you grant to the Fund Manager a power of attorney to make, execute, sign, acknowledge, swear to, deliver, record and file as your attorney and on your behalf: any other business certificate or other instrument or document of any kind that the Fund Manager deems necessary or desirable to accomplish the business, purpose and objectives of the Fund, and that is required by any applicable law; any agreement or instrument which the Fund Manager deems appropriate to (i) admit you as an Investor in the Fund in accordance with the terms of the Investor s Agreement; (ii) effect the addition, substitution or removal of the Fund Manager pursuant to the Investor s Agreement; or (iii) effect an amendment or modification to the Investor s Agreement adopted in accordance with the terms of the Investor s Agreement; provided always, to the fullest extent permitted by law, this power of attorney is irrevocable and shall survive, and shall not be affected by, your subsequent death, disability, incapacity, incompetence, termination, bankruptcy, insolvency or dissolution. This power of attorney will only terminate upon your complete withdrawal from the Fund. You agree that the foregoing representations, warranties, agreements and acknowledgments shall survive the date of your admission to the Fund and this Application Form shall be binding upon and inure to the benefit of the parties and their successors and permitted assignees. k You agree that if this application is made by more than one person, your obligations shall be joint and several and the representations, warranties, agreements and acknowledgments herein shall be deemed to be made by and be binding upon such persons and their successors and assignees. l You agree that any term or provision of this Application Form which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Application Form or affecting the validity or enforceability of any of the terms or provisions of this Application Form in any other jurisdiction. m You undertake to notify the Fund Manager immediately if there are ever relevant circumstances of which the Fund Manager should be aware in relation to managing your Portfolio(s). 46

49 Application Form IFAs To be completed by the Investor s Financial Adviser We certify to Foresight Group LLP in the terms of paragraphs 1 and 2 below: 1. We have undertaken an adequate assessment of the Investor s expertise, experience and knowledge such as to give reasonable assurance to Foresight Group LLP in the light of the nature of the transactions or services envisaged that the Investor is capable of making its own investment decisions and understanding the risks involved in a participation in the Fund. 2. We have applied customer due diligence measures on a risk-sensitive basis in respect of the Investor to the standard required by The Money Laundering Regulations 2007 within the guidance for the UK Financial Sector issued by the Joint Money Laundering Steering Group and we certify that we have: (a) identified and verified the identity of the Investor on the basis of documents, data and information obtained from a reliable and independent source; (b) identified, where there is a beneficial owner who is not the Investor, the beneficial owner and have taken adequate measures, on the basis of documents, data and information obtained from a reliable and independent source, to verify his identity so that we know who the beneficial owner is, including, in the case of a legal person, trust or similar arrangement, measures to understand the ownership and control structure of the person, trust or arrangement and the identity of the beneficial owner and details of the ownership and control structure are set out in the Schedule hereto; and (c) obtained information on the purpose and intended nature of the Investor s proposed investment in the Foresight Solar EIS Fund, as the case may be, which information is set out in the Schedule hereto. We consent to Foresight relying on this certificate Firm Name: Contact Name: Address: post Code: Telephone: Fax: FSA registration no: Signature: date: 47

50 Application Form IFAs Schedule: To be completed by the Investor s Financial Adviser where the Beneficial Owner is not the Investor Please complete: We have applied customer due diligence measures on a risk-sensitive basis in respect of the Investor to the standard required by The Money Laundering Regulations 2007 within the guidance for the UK Financial Sector issued by the Joint Money Laundering Steering Group and we certify that we have identified that the beneficial owner is: and (in the case of a legal person, trust or similar arrangement), the ownership and control structure of the person, trust or arrangement is: The purpose of the investment is: Professional Client Assessment Form: Private investors In order for you to participate in the Fund, we must undertake an assessment of your expertise, experience and knowledge so as to give us reasonable assurance, in light of the nature of investments in complying funds such as The, that you are capable of making your own investment decisions and understanding the risks involved. Please answer the following questions providing details, where required, in the space provided. 1. Please give your most current/most recent occupation 2. Please give details of any university degrees or professional qualifications which you hold 3. Please list any current company directorships you hold/have held in the last five years Current: F S E Last Five Years: 4. Do you hold a portfolio of shares? Are these shares in listed or unlisted companies? 5. Please describe the type of investments you have made within the last five years. (e.g. EIS, VCT, FTSE 100) 6. Have you been in a network or syndicate of business angels for at least six months prior to today s date? Please give details 7. Please provide any further information (e.g. details of your wider experience or background) which you think might be relevant to our assessment of you as a professional client in relation to investments, particularly in EIS or similar funds 48

51 Corporate Information Directors (Non-executive) John Maples (Chairman) Mike Liston Tim Dowlen Registered Office and Head Office ECA Court South Park Auditors oresight Sevenoaks Ernst & Young LLP Kent TN13 1DU 1 More London Place London SE1 2AF Company Registration Number Solicitors and VCT Tax Advisers RW Blears LLP olar 125 Old Broad Street Website London EC2N 1AR Broker Telephone Number Singer Capital Markets Limited Hanover Street IS Fund London W15 1YZ Company Secretary and Accountant Sponsor Foresight Managers Limited BDO LLP ECA Court 125 Colmore Row South Park Birmingham B3 3SD Sevenoaks Kent TN13 1DU Receiving Agent Information Memorandum with Application Form Registrars Computershare Investor Services PLC P.O. Box 859 The Pavilions Bridgwater Road Bristol BS99 1XZ Investment Manager and Promoter Foresight Group LLP ECA Court South Park Sevenoaks Kent TN13 1DU The City Partnership (UK) Limited Thistle House Thistle Street Edinburgh EH2 1DF Bankers Barclays Bank plc 54 Lombard Street London EC3P 3AH Foresight Solar VCT PLC 45