London Shipping Limited

Transcription

1 London Shipping Limited An asset-backed Enterprise Investment Scheme Promoted by Enterprise Investment Partners LLP Enterprise Investment Partners LLP are an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority Job No: Proof Event: 6 Customer: Enterprise Project Title: London Shipping Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA T: F:

2 IMPORTANT NOTICE THIS DOCUMENT CONSTITUTES A FINANCIAL PROMOTION PURSUANT TO SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 AND IS ISSUED BY ENTERPRISE INVESTMENT PARTNERS LLP (ENTERPRISE) WHICH IS AN APPOINTED REPRESENTATIVE OF RESOLUTION COMPLIANCE LIMITED, WHICH IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY. RELIANCE ON THIS PROMOTION MAY EXPOSE AN INDIVIDUAL TO A SIGNIFICANT RISK OF LOSING ALL OF THE PROPERTY OR ASSETS INVESTED. IF YOU ARE IN ANY DOUBT ABOUT THE ACTION YOU SHOULD TAKE OR THE CONTENTS OF THIS DOCUMENT, YOU SHOULD CONTACT YOUR STOCKBROKER, SOLICITOR, ACCOUNTANT, BANK MANAGER OR OTHER PROFESSIONAL ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000, WHO SPECIALISES IN ADVISING ON INVESTMENT IN SHARES AND OTHER SECURITIES. This investment memorandum does not constitute a prospectus as defined by the Prospectus Regulations 2005 (the Regulations ), and has not been prepared in accordance with the requirements of the Regulations. To the best of the knowledge and belief of the Directors of the Company, who have taken all reasonable care to ensure that such is the case, the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors, details of whom are set out on page 11, accept responsibility accordingly. Prospective investors should not treat the contents of this document as constituting advice relating to legal, taxation or investment matters and are advised to consult their own professional advisers authorised under the Financial Services and Markets Act 2000 concerning subscription for Shares and investment in the Company. LONDON SHIPPING LIMITED (a company incorporated in England and Wales with company number ) Offer for Subscription Promoted by Enterprise Investment Partners LLP (an appointed representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority, with firm registration number ) An offer of up to 5,000,000 Ordinary Shares of 1 penny each in the Company at 1 per share (with a minimum subscription of 10,000 per Investor). Securities issued by the Company are not and will not be listed or dealt in on any stock exchange in the immediate term. Each of Enterprise Investment Partners LLP and Resolution Compliance Limited is acting for London Shipping Limited in connection with the arrangements set out in this document and is not acting for anyone else and will not be responsible to anyone other than London Shipping Limited for providing the protections offered to customers of Enterprise Investment Partners LLP or Resolution Compliance Limited or for providing advice in respect of the contents of this document or the Offer. No liability is accepted by Enterprise Investment Partners LLP or Resolution Compliance Limited, for the accuracy of any information or opinions contained in or for the omission of any material information for this document, for which the Company and the Directors are solely responsible. An investment in the Company may not be suitable for all recipients of this document. A prospective investor should consider carefully whether an investment in the Company is suitable for them in the light of their personal circumstances and the financial resources available to them. The Company has applied to HMRC for advanced assurance that the Company will qualify for EIS which assurance was given on 23 December Prospective investors should be aware that receipt of advance assurance from HMRC does not guarantee that EIS clearance will be granted once the Company begins trading and in any case an investment in the Company may not attract EIS Relief or some or any of the other Tax Advantages. Investors are advised to take their own taxation advice. The subscription list will open at am on 7 January 2014 and close on the earlier of full subscription or 12 noon on 31 March 2014, unless extended or closed for subscription at any earlier date by the Promoter. Applications must be made subject to the terms and conditions of application appearing on pages 34 to 37 (inclusive) by completing the Application Form appearing on page 39 or 41. Your attention is drawn to Part III of this document headed Risk Factors commencing on page 18, which sets out certain risk factors relating to any investment in Ordinary Shares. All statements regarding the Company s business, financial position and prospects should be viewed in the light of the risk factors set out in Part III of this document. Note: This document does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to anyone to whom it is unlawful to make such a solicitation. Prospective investors should inform themselves of and observe all applicable laws and regulations including any taxation or exchange control legislation in the countries of their citizenship, residence, domicile or such other status as may be relevant. An investment in the Company is suitable only for financially sophisticated investors who are capable of evaluating the merits and risks of such investment, who do not require immediate liquidity for their investment and who have sufficient resources to bear any loss which might result from such investment. If you are in doubt about the contents of this document, you should consult your stockbroker, bank manager, solicitor or other professional adviser. Enterprise Investment Partners LLP is an appointed representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority.

3 CONTENTS Page Key Information 3 Part I Business Review and Company Strategy 6 Part II Taxation 14 Part III Risk Factors 18 Definitions 22 Part IV General Information about the Company 25 Directors and Advisers 32 Part V General Information about the Offer 33 Schedule 1 33 Schedule 2 Terms and Conditions of Application 34 Schedule 3 How to complete the Application Form 38 Application Form for UK resident individuals 39 Application Form for Non-Doms/NORs 41 Application Checklist 44 2

4 KEY INFORMATION The following section should be read in conjunction with the full text of this document. Your attention is drawn, in particular, to Part III of this document headed Risk Factors on pages 18 to 21. There is a significant risk that Investors could lose their entire investment in the Company. THE COMPANY London Shipping Limited has been established to own and operate a mid-sized bulk carrier of between 40,000 and 60,000 deadweight tonnes to be chartered out on a commercial basis and to continue operating that trade for a minimum period of three years. Owning and operating commercial vessels is one of the few asset-backed trades allowable under the EIS. The Company intends to acquire a vessel around 10 to 20 years old. Recent sales suggest such a vessel will cost of the order of 6 million to 12 million, which the Company will fund through a combination of equity and debt of up to 65% of the vessel s value. Vessels of this type typically have a life of 25 years. THE BUSINESS CASE Enterprise and the Directors believe the shipping market is currently showing signs of recovery. All the major indices new build prices, second hand prices and charter rates are beginning to move back up towards long-term trend. The start of this anticipated long-term revival in values has led to increased investment from traditional shipowners as well as attracting strong interest from several private equity groups. ASSET MANAGER AND TRACK RECORD The Company will subcontract the day-to-day running of the business to British Marine plc, a UK owned and managed ship-owner and operator with a 14 year track record of successfully operating mid-size bulk carriers under the UK flag and Tonnage Tax regime. British Marine was originally set up in 1999 by CEO Alan Bekhor as one of a series of three EIS companies, which between them purchased seven vessels from 1999 to At the time of the merger of the companies in 2007 the accumulated cash and fair value of the vessels showed an IRR of 37% over a seven year period. The interests of British Marine will be aligned with Investors, as a significant part of its overall remuneration could be derived from a management incentive scheme linked to value returned to Investors. TARGET RETURNS Enterprise and the Directors are targeting the following returns to Investors, free of income tax and CGT: Base Case 1.32 for each net 70p invested, being an expected IRR of 17% per annum Medium Case 1.54 for each net 70p invested, being an expected IRR of 22% per annum High Case 1.80 for each net 70p invested, being an expected IRR of 26% per annum The target returns are based on a number of assumptions considered reasonable by Enterprise and the Directors and are net of all Company costs, fees, and management incentives. Further detail on these target returns and the assumptions behind them can be found under the section Target Returns on page 9. EXIT ROUTE It is the intention of the Directors to seek an Exit for investors after three and a half years trading through a sale, dependent on conditions in the shipping market. The market for mid-size vessels of this sort is currently very liquid, with sales of this type of vessel averaging 12 per month between January and November

5 THE DIRECTORS The Company will have the following directors: Braden Harris, Chairman has 26 years experience in asset-based financing and investments, the latter half of which has been focused on the maritime sector. Currently MD of Allocean Maritime Investments, a specialist shipping investment company founded in Sunil Malhotra is a qualified Master Mariner with 38 years experience in the shipping industry, who has served as Master on board various types of vessels, including bulk carriers, container ships and Ro-Ro vessels. He has been COO of British Marine since 2000, with specific responsibility for the technical management of British Marine s fleet. Martin Sherwood Martin has many years experience of small company fund-raising and the tax-efficient investment market. Formerly head of Tax Efficient Solutions at Smith & Williamson, he left to set up Enterprise in 2010 and has been closely involved with the EIS since its inception, sits on the board of a number of a number of EIS companies and is co-founder and director of the EIS Association. MANAGEMENT INCENTIVE Management will be entitled to 30% of the proceeds above the level of 1.25 returned to Investors subject to a precipice after the expiry of four years from the date of the last issue of shares, thus incentivising management to provide a timely Exit for Investors by no later than four years. TAXATION AND EIS RELIEF The maximum investment in EIS qualifying shares, on which EIS income tax relief is available, is 1,000,000 per income tax year (see further details in the section of this document headed Taxation in respect of the potential carry back of EIS income tax relief). There is no limit to the amount of CGT which can be deferred. Investors in EIS Qualifying Companies can, depending on their individual circumstances, enjoy some or all of the following tax advantages: EIS income tax relief of 30% of the value of Investment; Exemption from CGT on disposal of EIS shares; Unlimited deferral of capital gains from the previous three years or the subsequent 12 months; Income tax or capital gains tax relief for a loss on disposal of EIS shares; and Inheritance tax exemption after two years, with no limit on the amount of the investment qualifying for this exemption. EIS qualifying investments are one of the few investments that offer the opportunity to defer capital gains tax liabilities. The Company hopes to be able to issue tax certificates to enable Investors to obtain tax relief by September BUSINESS INVESTMENT RELIEF An investment in the Company will qualify for Business Investment Relief on the basis that the Company is an EIS Qualifying Company. Details of BIR are set out in Part B of Part II of this document headed Taxation. OFFER EXPENSES Initial Charge of 6% of funds raised, out of which authorised intermediaries may choose to take an initial commission of 3%, or 2% plus annual trail of 0.35% until the earlier of Exit or the expiry of four years. Investments in single company EIS offers fall outside the jurisdiction of the Retail Distribution Review. Ongoing charge of 1.5% per annum. 4

6 MINIMUM AND MAXIMUM SUBSCRIPTIONS The Minimum and Maximum Subscription levels are 3.5 million and 5 million respectively. MINIMUM INDIVIDUAL INVESTMENT The minimum investment per Investor is 10,000 with increments thereafter of 5,000. Any subscriptions made on an Application Form which exceed 85,000 will be excluded from the limit to qualify for an exemption from the need for a formal prospectus, which is the equivalent of 5 million in any 12 month period. CLOSING DATE The earlier of Maximum Subscription or 31 March 2014 unless extended. ASSISTANCE Enquiries and requests for further copies of this information Memorandum should be referred to Enterprise Investment Partners: Christian Elmes T: M: E: celmes@enterprise-ip.com Martin Sherwood T: M: E: msherwood@enterprise-ip.com Enterprise Website 5

7 Part I BUSINESS REVIEW AND COMPANY STRATEGY BUSINESS STRATEGY OF THE COMPANY It is the intention of the Company to acquire and operate a mid-sized geared bulk carrier of between 40,000 and 60,000 tons ( Handymax ), to be chartered out on a commercial basis for no less than three years. The Directors believe it will be possible to acquire a good-quality vessel of this type for in the region of 6 million to 12 million (depending upon the age of the vessel). The gear (or cranes) will allow the vessel to load and discharge in ports which do not have such facilities on the shore and will therefore maximize the trading area of the vessel. The chartering strategy for the Company will be optimised around the best rates achievable for a given period of up to 12 months at a time, with creditworthy and reliable counterparties. British Marine, as asset manager, will use its experience and market presence to source charters for the vessel in line with these parameters. BUSINESS CASE Recent trends in the Shipping Market The mid-size cargo shipping market is showing signs of recovery after a prolonged period of recession and the demand for such ships is set to outstrip supply in the next few years. Current asset prices would appear to be below long-term trend. There has been a revival of interest from private equity groups in recent months, attracted by what appears to be the start of a long-term revival in values, as reported on 28 October 2013 by the Financial Times: Private equity s move into Shipping has been widely welcomed as a signal that the sector is emerging from the crisis. This is smart money and it s a sign that confidence is returning to the industry, and that we may finally be at the bottom of the cycle said Jim Laurence, president of Marine Money. Both current asset prices and current charter rates appear to be below long-term trend, as is evidenced by the following two graphs: $80,000 Handymax Charter Rates ($ per day) $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 Average $10,000 0 July-05 July-06 July-07 July-08 July-09 July-10 July-11 July-12 July-13 Source: Baltic Exchange 6

8 $60 15 Year Old Handymax Prices ($m) $50 $40 $30 $20 Average $10 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Source: Baltic Exchange It is also worth noting the very long-term trend in newbuild prices, as shown below: $50 Handymax Newbuild Prices ($m) $45 $40 $35 $30 $25 Trend $20 $15 $10 $5 $ Source: Platou FINANCIAL STRATEGY Loan Facilities The Company will acquire the vessel utilising equity raised under the Offer and debt from a bank chosen by the Directors. In the event the Company is unable to fund all of its debt through a loan from a commercial bank, debt finance may be sought from other sources, including British Marine, on normal commercial secured lending terms. The exact proportion of equity and debt will depend on the amount raised in the Offer, the age of the vessel and the consequent availability of debt funding. It is anticipated the Company will use debt which will in no event exceed 65% loan to value. The Directors intend that any Loan Facility should be secured on the vessel by way of a first priority registered mortgage and other standard security for this type of facility, and any borrowing should be of at least a 4-year term, with the ability for repayment before the fourth anniversary of drawing. If necessary, the Directors will consider the use of a secondary facility secured by a second charge on the vessel. 7

9 HEDGING DEVICES The Directors will consider putting in place a foreign exchange facility enabling it to manage fluctuations in the sterling to dollar exchange rate, as the Company will have exposure to both currencies. Additionally, the Directors will consider putting in place appropriate strategies for management of payments in other currencies and fluctuations in interest rates. TONNAGE TAX The Company expects to be able to benefit from the Tonnage Tax regime. Tonnage Tax is a variation of corporation tax introduced by the Government in 2000 to benefit shipping companies managed in the UK. Tonnage Tax has replaced corporation tax rules by permitting corporation tax to be levied on a company s profits calculated according to a formula based on the net registered tonnage of a company s vessels rather than traditional accounting methods. Tonnage Tax benefits only apply to profits derived from shipping activities and not from any non-shipping activities. To qualify for Tonnage Tax a company must train one officer cadet per year in which it participates in the scheme. The cost of this training is currently equivalent to approximately 20,000 per annum. If a company elects to pay Tonnage Tax it can no longer offset losses from one year to the next. Provided a company is profitable, the Tonnage Tax regime is capable of delivering significant cost savings compared with the corporation tax liability which would normally be payable. OPERATING STRATEGY Under the Management Services Agreement and Asset Manager Agreement, the Company has agreed to sub-contract the day-to-day operational management of the vessel to British Marine, who will assist the board with all day to day aspects of running the Company. Tasks to be undertaken by British Marine will include the following: Commercial: Identifying and evaluating a suitable vessel for the Company to acquire and carrying out the necessary checks and audits to enable the acquisition, and to negotiate the final terms of acquisition. Procuring suitable charters for the vessel. Keeping the Company up to date with developments in the shipping industry. Making arrangements for the sale of the vessel. Operational: Preparing operating budgets for the vessel for a four-year period. Arranging all legal, registration and classification requirements of the vessel. Dealing with commercial disputes should they arise. Arranging insurance for the vessel. Selecting and advising on the engagement of the vessel s crew, their transportation and repatriation. Daily monitoring of the vessel s performance, and supervision of the maintenance and general efficiency of the vessel. Arranging dry docking, repairs, alteration and the general upkeep of the vessel. Arranging the supply of stores, spares and provisions. Appointment of surveyors and technical consultants as appropriate. Financial: Maintaining records of all costs and expenditure incurred. Providing management accounts on a monthly basis, to include income and profit on an actual and budgeted basis. Preparing statutory accounts and tax filings as required. Making the necessary arrangements for the Company to qualify for Tonnage Tax, including the training of cadets. Arranging appropriate loan or mortgage facilities for the vessel. Arranging hedging contracts for the Company. Arranging for independent valuation of the vessel as appropriate. Arranging foreign exchange contracts for the Company. 8

10 The role of the Board will include the following activities: Reviewing the acquisition proposals put forward by British Marine. Strategic commercial and technical decisions. Establishing the annual performance budget for the vessel for the following 12 month period. Monitoring performance of the vessel month by month against the annual performance budget. Implementing any corrective action as a result of failure of the vessel to achieve its budgeted figures. Establishing and monitoring of any foreign exchange or other hedging. Approving the statutory accounts. The interests of British Marine will be aligned with Investors, as a significant part of its overall remuneration could be derived from its holding of A Ordinary Shares to which it will only be entitled if it hits certain financial performance targets within a set time frame. INVESTMENT STRATEGY Target returns Enterprise and the Directors are targeting the following returns to Investors on a Base, Medium and High Case basis, and the assumptions set out below. London Shipping Limited EIS Financial Illustrations Returns ( ) Dates Base Medium High Case Case Case Initial cost 31 March , , ,000 Less: income tax relief at 30% 30 September ,000 30,000 30,000 70,000 70,000 70,000 Investor distribution on exit 30 September , , ,931 Tax free gain 61,530 83, ,931 Tax free IRR 17% 22% 26% Gross equivalent IRR (28% capital gains tax payer (who pays income tax at the higher rate or additional rate)) 27% 32% 38% The above returns are for illustrative purposes only and no forecast (guaranteed or otherwise) is implied or should be inferred. The returns above are based on the assumptions described below. Assumptions The gross equivalent IRR is calculated by grossing up the tax free dividend of 30,000 for higher rate (45%) income taxpayer after 6 months and net tax-free gain for a 28% capital gains taxpayer at Exit. The potential returns include income tax relief but exclude any potential benefits from IHT relief or CGT deferral relief. The Base, Medium and High Case returns are calculated using daily time charter rates as shown in the table below. Year Base case US$/day Medium case US$/day High case US$/day ,800 11,800 11, ,500 12,500 12, ,500 19,500 22, ,938 19,988 22,550 9

11 The returns assume all Company and vessel costs such as operating expenses of the vessel, commissions, technical management and asset management fees, and commercial, administration, legal and professional fees and performance incentives. The net tax-free gain is the sum of the cumulative net after tax (tonnage tax) cashflows to the date of Exit, 3 years and 6 months from the commencement of the Company on 6 April The Exit value of the vessel is calculated by taking current market value of a 15 year old vessel and projecting the value forward by 3 years, to an 18 year old vessel. Three values are calculated, Base Case value ( 7,130,000) based on current trend, Medium Case value ( 8,000,000) based on one standard deviation above trend, and a High Case value ( 8,980,000) based on two standard deviations above trend. The returns assume equity fundraise of 5 million. The returns assume senior debt at 45% of capital expenditure on the vessel, with an arrangement fee of 1.5%, an interest rate of 4.5% (4% margin plus 0.50% swap rate equivalent for 2 years but with a 3 month forward start) and repayment profile of 4 years with a first charge over the vessel. The returns assume junior debt revolving facility at 15% of capital expenditure on the vessel, with an arrangement fee of 1.5%, and interest rate of 10%, with a second fixed charge over the vessel. The returns assume that a 15 year old Handymax 8,600 Lightweight Tonnage Vessel (LWT) is purchased with the equity and bank borrowing for approximately 8,000,000, which will have an operating life of 10 years. $182,000 per annum commercial management and $550 per diem technical management costs. Exit Route It is the intention of the Directors to seek an Exit for investors after three and a half years trading through a sale of the vessel, dependent on conditions in the shipping market. The market for mid-size vessels of this sort is very liquid. British Marine has achieved the sale of 8 vessels over the last 14 years. In 2013 sales of this type of vessel have averaged 12 per month between January and November Because of the cyclical nature of ship asset values, if market conditions after this period are not appropriate to achieve a suitable return, the Company could continue to trade until an appropriate asset value could be obtained. Management Incentive and Fees Once Investors have received a return of 1.25 for each 1 gross invested (70p net of EIS Income Tax relief) on an Exit, Management will be entitled to 30% of all proceeds from the Company above this threshold. This 30% will be split 22% to British Marine, 5% to Enterprise and 3% to the Chairman Braden Harris. This incentive will be subject to a precipice and will fall away after the expiry of four years from the date of the last issue of shares in the Company, thus incentivising management to provide a timely Exit for Investors by no later than four years from the Closing Date. THE PARTIES The Promoter Enterprise Investment Partners LLP ( is a specialist smallcap investment boutique established three years ago, whose activities include corporate finance, fund advisory and design and promotion of tax-efficient investment products, with major emphasis on the EIS. Enterprise has considerable experience of EIS and the tax-efficient industry, with particular expertise in the leisure, media, commercial property and renewable energy sectors. The principals together have raised over 500 million under the EIS, VCT and other tax-efficient structures over the last 20 years. Martin Sherwood is a Founding Director of the EIS Association, of which Enterprise Investment Partners LLP is a member. The Asset Manager British Marine is a UK owned and managed ship-owner and operator founded by its CEO Alan Bekhor in Headquartered in London, and with offices in Singapore and India, the company has a highly efficient commercial and technical management operation which it performs 10

12 in-house. The company currently owns 7 geared (45-60,000 dwt) bulk carriers, all of which were built in Japanese yards. British Marine also charters in vessels from third parties to service the freight needs of its industrial customers. Originally, British Marine was set up as one of a series of shipping companies operating under EIS rules, and also within the UK tonnage tax regime (a preferential tax regime for shipping companies). After the qualifying EIS period was over, the assets were all consolidated under British Marine, which took place on 1 February Consequently British Marine has a unique experience of operating ships in compliance with EIS and tonnage tax rules, and with successful results: at the time of the merger of the companies in 2007, the accumulated cash and fair value of the vessels showed an IRR of 37% over a seven year period. The Directors The Company will have the following directors: Braden Harris, Chairman Braden has 26 years experience in asset-based financing and investments, the latter half of which has been focused on the maritime sector. He joined Allco Finance in 1999, an Australian asset-based investment firm, and as a partner set up and managed two shipping companies and arranged financing for over US$1 billion of new vessels. Braden joined Cleaves, a ship broking and finance arranger, in 2005 as a partner and major shareholder, where he co-founded the finance division and was responsible for the establishment of several shipping limited partnership transactions with a value in excess of US$800m. He currently serves as Managing Director of Allocean Maritime Investments, a specialist shipping investment company which he founded in Braden graduated from the City University (now Cass) Business School with a BSc (Hons) in Business Studies in Braden will draw a salary of 15,000 per annum from the Company and will also participate in the management incentive scheme. Sunil Malhotra Captain Sunil Malhotra is a qualified Master Mariner with 38 years of experience in the shipping industry. A fellow of the Institute of Chartered Shipbrokers, Sunil holds a ship management degree from Plymouth University, England. He served as a Master on board various types of vessels, including dry bulk carriers, container ships and ro-ro vessels. In 1988, Sunil co-founded and managed Voigt Maritime (UK) Limited, a ship broking and vessel management company. In 1992 he joined UBT, a subsidiary of the Trans-World group, where as Managing Director he was responsible for the group s extensive chartering activities. Sunil joined British Marine in 2000 and serves as its Chief Operating Officer, with specific responsibility for the technical management of British Marine s fleet. Sunil will not be drawing a salary from the Company as his services will be included as part of the management services provided by British Marine. Martin Sherwood Martin has many years experience of small company fund-raising and in particular the tax-efficient investment market. He was founder and head of Tax Efficient Solutions, first at City stockbroker Teather & Greenwood ( ) and subsequently at Smith & Williamson ( ), which he left to set up Enterprise in He has been closely involved with the EIS since its inception, sits on the board of a number of a number of EIS companies and is co-founder and director of the EIS Association ( Martin will not be drawing a salary from the Company, since his services will be included in the Investor Relations service provided by Enterprise. FURTHER DETAILS Taxation and EIS relief The maximum investment in EIS qualifying shares, on which EIS income tax relief is available, is 1,000,000 per income tax year (see further details in Part A of Part II of this document headed 11

13 Taxation in respect of the potential carry back of EIS income tax relief) There is no limit to the amount of CGT which can be deferred. Investors in EIS Qualifying Companies can, depending on their individual circumstances, enjoy some or all of the following tax advantages: EIS income tax relief of 30% of the value of Investment; Exemption from CGT on disposal of EIS shares; Unlimited deferral of capital gains from the previous three years or the subsequent 12 months; Income tax or capital gains tax relief for a loss on disposal of EIS shares; and Inheritance tax exemption after two years. There is no limit on the amount of the investment qualifying for this exemption. EIS qualifying investments are one of the few investments that offer the opportunity to defer capital gains tax liabilities. The Company hopes to be able to issue tax certificates to enable Investors to obtain tax relief by September Business Investment Relief Following recent reforms of the taxation of Non-Doms and NORs and the introduction of BIR, Non-Doms and NORs who are entitled to and have claimed the remittance basis of taxation, may in relevant circumstances bring funds into the UK to make investments without incurring a taxable remittance. Companies that are EIS Qualifying Companies should also be eligible trading companies for the purposes of BIR. Therefore, Non-Doms and NORs who have claimed the remittance basis of taxation and who would otherwise not wish to bring foreign income (and gains in the case of Non-Doms) into the UK (on the basis that it would trigger a taxable remittance), should now be able to do so in order to invest in EIS Qualifying Companies without incurring a UK tax liability. If such Non-Doms and NORs otherwise have sufficient UK income tax liability and/or UK capital gains, they may also be eligible to obtain EIS Relief and/or CGT Deferral Relief in respect of investments made in EIS Qualifying Companies. On realisation of Qualifying Investments, disposal proceeds amounting to the BIR Remittance must either be taken offshore or reinvested in further onshore Qualifying Investments in order to prevent a taxable remittance arising, but any profits or gains arising from the investment may remain onshore tax free. In summary, Non-Doms and NORs who have claimed the remittance basis of taxation should be able to: 1. use those foreign funds which are subject to the remittance basis to invest in the Company without triggering a taxable remittance; and 2. obtain Tax Advantages under the EIS in order to reduce or defer tax liabilities which would otherwise arise on their UK income and gains. Offer Expenses Enterprise will be entitled to an initial commission of 6% of the amount invested in the Company and out of this it will pay all adviser and professional charges and expenses associated with setting up the Company. Investors should, however, be able to obtain tax relief on the full amount of their investment. Investments in single company EIS offers fall outside the jurisdiction of the Retail Distribution Review. Enterprise will also be entitled to an annual administrative services fee of 0.5% of gross funds invested in the Company (plus VAT) for four years, to cover an investor relations service including providing Investors with quarterly updates over the term of the investment, the services of a nonexecutive director (Martin Sherwood initially) and a comprehensive company secretarial and share registry service. Under the Asset Manager Agreement, the Asset Manager will be entitled to an annual management fee equal to 1% of gross funds invested in the Company (plus VAT), payable monthly in arrears. 12

14 Details of the Offer The Minimum and Maximum Subscription levels are 3.5 million and 5 million respectively. The minimum investment per Investor is 10,000 with increments thereafter of 5,000. Closing Date The Offer will close on the earlier of full subscription or 31 March 2014 unless extended. It is intended that subscriptions to the Company will be invested in the tax year, so that Investors can obtain income tax relief in respect of tax year or carry relief back to tax year, as set out in Part A of Part II of this document headed Taxation. Intermediary Commission Since this is an investment which is outside the scope of the Retail Distribution Review, intermediaries authorised under FSMA will be entitled to introductory commissions. An intermediary may choose to take an initial commission of 3% of subscriptions from Investors (and accepted by the Promoter) introduced by that intermediary, or 2% initial commission and a trail commission of 0.35% of funds introduced per annum, payable annually (and subject to the Retail Distribution Review) until the earlier of an Investor ceasing to be a holder of Shares or the fourth anniversary of the Closing Date. 13

15 Part II TAXATION The summary below gives a brief outline of the Tax Advantages. It does not set out all of the rules that must be met and is intended only as a general guide. This summary should not be construed as constituting advice which Investors should obtain from their own professional advisers before investing in the Company. The taxation levels, bases and reliefs described in the Information Memorandum are based on existing law and what is understood to be current HMRC practice, but this may be subject to change in the future. PART A TAXATION OF UK RESIDENTS APPLICATION TO HMRC London Shipping Limited is a new company which has already received provisional clearance from HMRC that it should qualify for EIS, which assurance was given on 23 December However, the Company must complete four months of trading before an application can be made to HMRC for full EIS clearance. The Company hopes to be able to issue tax certificates to enable investors to obtain tax relief by September However, potential Investors should be aware that the various Tax Advantages currently available under the Enterprise Investment Scheme (EIS) might change in future. This document is based on the understanding of the existing law and HMRC practice as at the date of this document. Future changes to the tax legislation may adversely affect the performance of the Company and the return to the Investor. CAPITAL GAINS TAX Capital gains tax (CGT) for gains on disposals by individuals the rate of CGT is 18% if total taxable gains and income are less than the upper limit of the income tax basic rate band. The rate of CGT is 28% for gains (or part of gains) above that limit. For trustees and personal representatives of deceased persons, the CGT rate is 28%. Entrepreneurs Relief in certain circumstances reduces the amount of the CGT on a disposal of qualifying business assets to 10%, as long as an individual has met the qualifying conditions throughout a one-year qualifying period either up to the date of disposal or the date the business ceased. Qualifying capital gains for each individual are subject to a lifetime limit of 10 million. Investors need to consider all of the above in light of their individual circumstances. CLAIMING EIS The Investor can obtain EIS Relief in the current tax year or carry the relief back to the previous tax year. Once a company has been trading for four months, it can apply to HMRC for full clearance and can then send Investors a Form EIS 3 (see below). TAX ADVANTAGES The Tax Advantages for Investors making an investment into the Company include the following: EIS Relief on Subscriptions Individuals who subscribe to the Offer can obtain EIS Relief of 30% on amounts of up to 1,000,000 for the 2013/2014 tax year, or such amount which reduces their income tax liability to nil (if smaller), in any tax year they subscribe for eligible shares in an EIS Qualifying Company. EIS Relief is given for the tax year in which the Investor makes an investment in an EIS Qualifying Company, or if you have an income tax liability in the preceding year you can claim relief against that liability through Carry Back Relief; any carry back to the 2012/2013 tax year will attract EIS Relief at 30% on amounts up to 1,000,000. The certificate stating and confirming the EIS Relief obtainable by an Investor is on Form EIS 3 issued by the EIS Qualifying Company following an investment by an Investor and once the Company has been trading for four months. An Investor cannot obtain EIS Relief without Form 14

16 EIS 3. The latest date on which an Investor can claim EIS Relief is five years after the 31 January following the tax year to which the claim relates. EIS Relief will be withdrawn if an Investment is not held for three years from the date of Investment (or from the date of commencement of the EIS Qualifying Company s trade if later), or if the Investor is connected with any EIS Qualifying Company in which an Investment is made either within two years before or three years after the date of Investment in the EIS Qualifying Company. Husbands and wives (and civil partners) can each make investments up to 1,000,000 in any tax year provided this would not take their total shareholdings, with those of any associated parties, in any one company to over 30% if they wish to claim EIS income tax relief. EIS Relief is currently given at the rate of 30% and is given against (but cannot exceed) the individual s income tax liability for the tax year in which the investment is made into the Company (unless carried back to the previous year). EXAMPLE Initial Investment 50,000 Less EIS Relief at 30% (15,000) Net cost of Investment 35,000 Exemption from CGT No CGT is payable on capital gains realised on the disposal of an Investment provided that the shares are held for at least three years from the date of Investment (or from the date of commencement of the Company s trade if later) and are Investments in respect of which EIS Relief has been obtained and not withdrawn. EXAMPLE Realised value of Investment after 3 years 80,000 Less Initial Investment (50,000) Tax free gain 30,000 Capital Gains Deferral Individuals can defer CGT on an unlimited amount of chargeable gains by making an Investment of an amount equivalent to the chargeable gain. The Investment must be made in the period beginning twelve months before and ending three years after the date of the disposal giving rise to the capital gains to be deferred. Investors should note that the Capital Gains Deferral is only a deferral of the original liability to CGT (unless there is a further Capital Gains Deferral). The gain is deferred until there is a chargeable event, such as a disposal of shares. EXAMPLE Gain (subject to 28% CGT) to be deferred Initial Investment 50,000 EIS Relief at 30% (15,000) CGT Deferral (28% on 50,000) (14,000) Net cost of Investment 21,000 Loss Relief Any capital losses realised in respect of an Investment made in the Company (net of EIS Relief attributable to the Investment) qualify for loss relief so that the capital loss can be set against capital gains of that tax year or a later tax year or against income of that tax year or income of the preceding tax year. 15

17 Below is an example of where the EIS investment is worthless and an Investor claims loss relief against income subject to income tax at 45%. EXAMPLE Initial Investment 50,000 EIS Relief at 30% (15,000) Net Investment for loss purposes 35,000 Loss relief (at 45% on 35,000) (15,750) Net loss on Investment post EIS relief 19,250 (or 38.5% of the Initial Investment) Inheritance Tax Relief An Investment made in the Company should in most cases qualify for 100% relief from IHT in the event of the death of an Investor as long as the Investment has been held for two years from the date of Investment and is held at the time of death. EXAMPLE Initial Investment 50,000 EIS Relief at 30% (15,000) CGT Deferral (at 28% on 50,000) (14,000) IHT Relief (at 40%) (20,000) Net cost of Investment 1,000 (or 2% of the Initial Investment) TRUSTEES Trustees of a trust, where, in certain conditions, the beneficiaries are individuals, will usually qualify for unlimited Capital Gains Deferral, Loss Relief (limited to capital gains) and IHT Relief. However, it must be remembered that neither EIS Income Tax Relief nor exemption from CGT on disposal is available to trustees. PART B BUSINESS INVESTMENT RELIEF 1. Realisation of Qualifying Investments In all cases, the amount of money that must be taken offshore or reinvested is capped at the amount of the BIR Remittance. Any profits or gains arising from the investment are not required to be taken offshore. BIR works by treating the relevant foreign income and/or gains as not remitted to the UK for the duration of the period that a Qualifying Investment is held. If the investment loses its qualifying status at any point, the Investor must dispose of the property within 90 days of the date upon which they became aware of the loss of status. A Non-Dom or NOR Investor must then either reinvest in other Qualifying Investments, or take the money back offshore within the 45 Day Period, in order to prevent a taxable remittance arising. Otherwise, if the Non-Dom or NOR Investor simply disposes of his/her Qualifying Investment, he must either take the money offshore, or reinvest in further Qualifying Investments, within the 45 Day Period in order to prevent a taxable remittance from arising. 2. Offshore Client Account Prior to Investment in the Company Prior to investment in the Company, the Non-Doms and NORs funds will be held by the Custodian in cash in the Custodian s non-interest bearing offshore client money account. 16

18 The Promoter will only authorise and instruct the Custodian to transfer the Non-Dom and NOR funds to the Custodian s onshore client money account with trust status when a Qualifying Investment is ready to be made and when the shares in the Company are to be issued to the Investor. In the unlikely event that Non-Dom or NOR funds are transferred onshore but the Qualifying Investment is not made for any reason, all such funds will be transferred back to the Custodian s offshore client account within the 45 Day Period. On Realisation of Qualifying Investments On realisation of a Qualifying Investment and receipt of the disposal proceeds, the Promoter will, except to the extent an Investor has instructed otherwise on the Application Form (ND), instruct the Custodian to transfer the net disposal proceeds back to the Custodian s offshore client account within the 45 Day Period. 3. Claiming BIR BIR must be claimed on the Investor s self-assessment tax return no later than the first anniversary of 31 January following the tax year in which the Qualifying Investment was made. 4. The Custodian and Nominee By completing the Non-Dom Application Form (see page 41), prospective Investors will, inter alia, be deemed to have irrevocably agreed to the Company having appointed the Custodian on behalf of Investors, to exercise the powers, and to carry out duties, on behalf of the Investors in accordance with the provisions of the Custodian Agreement, certain provisions of which are summarised below. Function The function of the Custodian will be to perform (or procure the performance of) custodian, nominee and associated administrative services, which are conferred upon it by the terms of the Custodian Agreement. Custodian s Obligations and Powers The Custodian will: hold funds arising from Investor subscriptions in cash in one or more offshore non-interest-bearing client money accounts or sub-accounts or other account arrangements as approved by the Manager. All client money will be held offshore in an appropriately regulated banking institution and onshore in an FCA approved UK bank, pending investment in the Company; transfer funds onshore and deploy funds on the instructions of the Promoter to acquire shares in the Company; and be authorised to carry out such other acts and deeds which are in its reasonable opinion necessary or reasonably incidental to its appointment as a Custodian, acting in compliance with Income Tax Act 2007, FSMA and the FCA Rules as applicable. Liability The Custodian will act in good faith and with reasonable care and diligence in the performance of its functions. The Custodian will not be liable to an Investor in the event of any loss in value of funds invested or any insolvency of any bank with which funds are deposited in accordance with the Custodian Agreement, nor in the event of any restriction on the Custodian s ability to withdraw funds from such bank for reasons reasonably beyond the control of the Custodian. 17

19 Part III RISK FACTORS Investors must ensure they are fully aware of the risky nature of this type of investment before committing to invest. Investors will be investing in an unquoted high risk company. The taxation notes within this Information Memorandum are merely a brief summary and should not be viewed as constituting tax advice. If in any doubt whatsoever, an Investor should not subscribe. It is strongly recommended that Investors seek appropriate independent advice from their financial adviser or other suitably qualified professional adviser (a) before investing and (b) before deciding to invest in the Company. The following risk factors should be considered but it should be noted that these are not exhaustive and not in any particular order of priority. Potential Investors should be aware that the various Tax Advantages currently available might change in future. This document is based on the understanding of the existing law and HMRC practice as at the date of this document, which may change in the future. Future changes to the tax legislation may adversely affect the performance of the Company and the returns to the Investor. INVESTMENT ISSUES 1. Fluctuations in value. The value of Investments and income from them can go down as well as up. If you cannot afford a total loss of your Investment or sums invested in acquiring it, you should not consider subscribing for Shares. It is not intended that any income or capital will be realised by Investors for at least three years. Even then it may be difficult to sell an Investment in the Company or to obtain accurate information about its worth. 2. Non-Readily Realisable Investments. The Company is unlisted. You should be aware that there may be difficulty in selling such Ordinary Shares at a reasonable price and, in some circumstances, it may be difficult to sell them at any price. You should not invest unless you have carefully thought about whether you can afford it and whether it is right for you. 3. Management. Unquoted companies typically have small management teams and are highly dependent on the skills and commitment of a small number of individuals. The loss of a key individual can have a significant effect on the Company s business. 4. Investment term. Investment in the Company should not be viewed as a short-term investment and Investors should be prepared to invest for at least three years. Any disposal within three years of Ordinary Shares will result in the loss of EIS Relief. The anticipated exit strategy of the Promoter is to seek an Exit, within a three to four year timeframe, but in practice, this may not be achievable. 5. Financial Services Compensation Scheme. The Financial Services Compensation Scheme or similar arrangement is not available for claims related to the subscription for, or the performance of, the Ordinary Shares. TAX ISSUES 6. Tax Advantages and legislation may change. Potential Investors should be aware that the various Tax Advantages currently available, might change in future. This document is based on the understanding of the existing law and HMRC practice as at the date of this document. Future changes to the tax legislation may adversely affect the performance of the Company and the return to the Investor. 7. Tax Advantages could be lost. There is no guarantee that EIS 3 certificates will be received or EIS relief will not subsequently be withdrawn. Furthermore, any of the Tax Advantages may change and the Tax Advantages may be lost or modified. In these circumstances, or where the Company fails to obtain EIS Relief or has it withdrawn, monies may not be returned to Investors and investment returns might be lower. 18

20 8. Early Exit. Notwithstanding the anticipated strategy of the Directors to wait at least three years before seeking an Exit, if considered appropriate an Investment could be sold before such time has elapsed. In such a case, EIS Relief would be lost. The Promoter will take account of this consequence in deciding whether or not to recommend to Investors the selling of their Investment. If a majority of Shares held by Investors are agreed to be sold, other Investors, even if they do not wish to do so, may be forced to sell under the provisions of the Articles. 9. Individual Investor s circumstances. The amount of relief an Investor may gain from an Investment in the Company depends on the Investor s individual circumstances. Investors are strongly advised to seek professional advice in relation to the taxation implications of their investment in the Company. 10. Loss of EIS Qualifying Company status. Any loss of status of an EIS Qualifying Company, whether through actions taken by the Company or otherwise, may lead to the loss of Tax Advantages for the Investor. No guarantee can be given that shares in the Company will qualify, or continue to qualify, for the Tax Advantages. BIR RISKS 11. The tax law relating to the remittance basis of taxation is complex and Investors should seek independent tax advice to determine and understand the suitability of making an investment. 12. BIR has been introduced only recently and so has not been operational for any meaningful period of time. Until BIR claims have been made by taxpayers and processed by HMRC, the Manager will have limited knowledge of the approach HMRC will take to the applicability of BIR in any given situation. 13. Although the Company is not aware of any provision that prevents BIR and EIS Relief being claimed simultaneously in respect of the same investment, there is currently no formal guidance on the interaction of these reliefs, and there is a risk that HMRC may try to interpret the legislation differently. 14. If the Company ceases to carry on, or make preparations to carry on, a commercial trade, its BIR qualifying status may be adversely affected. While the Company will require various safeguards are provided against this risk, neither the Company nor the Promoter can guarantee that the Company will retain their BIR or EIS qualifying status. 15. In the event that an Investor s interest in the Company is realised through a liquidation of the Company, the investment is likely to cease to be a Qualifying Investment at the date of appointment of the liquidator unless the liquidation takes place for genuine commercial reasons. If the investment ceases to be a Qualifying Investment at the date of appointment of the liquidator, the Investor must receive his/her liquidation distributions within 90 days of that date, and either reinvest the funds or take them offshore within the 45 Day period in order to prevent a remittance tax liability arising. Whilst the Company will make every effort to ensure that liquidation distributions are made within the 90 day time limit, neither the Company nor the Promoter can guarantee that such distributions will be made within this time frame. 16. Investors subscriptions to the Company will be held in a single bank account in the name of the Custodian. 17. Non-Doms who use offshore funds to invest in UK assets such as the Qualifying Investments may, as a result, become subject to UK Inheritance Tax in respect of those assets. Although it is expected that shares in the Company will be relevant business property (as defined in the Inheritance Tax Act 1984) and therefore qualify for business property relief, the shares must generally be held for a period of two years before the relief will be available. 19

21 18. BIR applies to Non-Doms and NORs who have claimed the remittance basis of taxation. There is a risk that Investors will lose their entitlement to claim BIR if they cease to be entitled to claim (and claim) the remittance basis of taxation in respect of the year that the income or gains used to make the Investment arose. This is a complex area of taxation and Investors should take their own advice before investing. INDUSTRY ISSUES 19. Capital values of vessels and revenues from trading of vessels may vary substantially according to and influenced by many factors, including market conditions, variations in trade patterns, technological advances, price and supply of fuel and speculative and political factors. Historic information shows that capital values and charter rates are highly cyclical. 20. The value of vessels can go down as well as up and therefore, upon sale the cost of a vessel may not be recouped from the sale proceeds. 21. The revenue earning capability of vessels may be reduced or even cease as a result of factors outside the control of the Company, which are caused by circumstances which affect either all or a particular sector of the shipping market generally or a particular circumstance applicable to the vessel concerned; examples include piracy, crew issues, adverse weather conditions, collision and other forms of damage, sinking and war. 22. Shipping is an international business; fluctuations in exchange rates can affect the financial performance of the Company, in particular the US Dollar/Sterling exchange rate fluctuations resulting from the investments being made in Sterling and the business being Dollar-based. 23. If vessels are traded on the spot market, the main part of the freight due will be paid in advance and the Company should have a lien on cargo for unpaid freight. If exposure to market rates has been hedged, by the time chartering or forward freight agreements, these contracts, by their nature carry a counterparty performance risk which, in the case of counterparty default or insolvency, may reduce or eliminate the actual benefit which the hedging was designed to provide. 24. In the case of total loss of a vessel, recoverability of that vessel s insured value and, likewise, in the case of partial damage, recoverability of the costs of repair, will be dependent upon successful collection of insurance claims: insurance does not cover all risks to which vessels are subject, and liability of insurers can be avoided. 25. Vessels require crewing and regular maintenance, which will need to be provided for out of vessel revenues, having a cost implication for the Company. Higher crew, equipment and spare parts costs could adversely affect the results of the Company s operations. Whilst the vessel will be inspected prior to acquisition, such inspections do not provide the same knowledge about the condition when compared to a vessel built for and operated exclusively by its owner. The vessel may have conditions or defects that the Company was not aware of when it was acquired and which may require costly repairs. 26. It may not be possible to identify a suitable vessel which meets the requirements laid down by the Board. 27. The Company is subject to complex laws and regulations including environmental regulations that can adversely affect the cost, manner and feasibility of conducting business. Compliance with such laws and regulations such as but not limited to, The International Maritime Organisation (IMO), or the Classification Society, may require the installation of costly equipment or operation charges that may affect the resale value or useful life of the vessel. Additional costs may also be incurred relating to air emissions, the management of ballast water, maintenance and inspection, elimination of tin based paint, development and implementation of emergency procedures and insurance coverage and other financial assurance of our ability to address pollution incidents. 20

22 28. Vessels may suffer damage due to the inherent operational risks of the seaborne transportation industry, and unexpected dry-docking costs may be experienced. 29. The Company s vessel and cargo may be at risk of being damaged or lost because of events such as marine disasters, bad weather, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy and other circumstances or events. These hazards may result in death or injury to persons, loss of revenue or property, environmental damage, higher insurance rates, damage to our relationships, delay or re-routing. 30. Insurance is carried to protect the Company against most of the accident-related risks inherent in the seaborne transportation industry, including marine hull and machinery insurance, protection and indemnity insurance which include pollution risk, crew insurance and war risk insurance. However, the Company may not be adequately insured to cover all potential losses, which could materially affect the Company s business. In the future, the vessel may not be able to obtain adequate insurance coverage at reasonable rates and may also be subject to calls or additional premiums. 31. The Company may not be able to obtain a loan to finance the vessel purchase, Interest rates on any loan finance are subject to variation based on economic and political factors beyond the control of the Company. If the market value of the vessel decreases, or the vessel is not generating sufficient net revenue, some of the covenants contained in the loan facility may be breached, and if unremedied, the lenders could accelerate the debt and foreclose on the vessel. Additionally, loan finance will rank ahead of the investors equity capital, so even though the vessel may have some value it may not be sufficient to repay any capital. 21

23 DEFINITIONS 45 Day Period as applicable, the period of 45 days: (a) from the date of the Non-Dom s or NOR s foreign income and/or gains are brought to the UK and during which Qualifying Investments must be made with such funds for BIR to apply; or (b) on realisation of investments, from the date of receipt by the investor of the disposal proceeds or liquidation distributions, and during which the BIR Remittance must either be reinvested or taken offshore to prevent a remittance tax liability arising Act or FSMA Financial Services and Markets Act 2000 Applicable Laws Applicant Application Form Application Form (ND) Articles all relevant UK laws, regulations and rules, including those of the FCA a person who submits an Application Form in respect of subscription for Ordinary Shares the application form completed by an Investor in the form provided at the back of this document (and references in this document to an Application Form include an Application Form (ND)) an application form to invest in the Company and send funds to the Offshore Custodian s offshore client account, completed by the Non-Dom or NOR the articles of association of the Company, a summary of which is set out in Part V of this document A Ordinary Shares A Ordinary Shares of 1 penny each in the capital of the Company A Shareholder a holder of A Ordinary Shares Asset Manager Asset Manager Agreement Associate BIR or Business Investment Relief BIR Remittance British Marine bulk carrier British Marine an agreement to be entered into between the Company, the Promoter and British Marine governing certain services to be provided to the Company and the Promoter by British Marine any holding or subsidiary company of any body corporate, or any subsidiary of any such company or any director of it business investment relief as set out in sections 809VA to 809VO of the Income Tax Act 2007 and available in certain prescribed circumstances to Non-Doms and NORs who have claimed the remittance basis of taxation which were introduced by the Finance Act 2012 the amount of foreign income and/or gains remitted and invested by any Non-Dom or NOR and on which BIR is to be claimed British Marine plc, a company registered in England and Wales with company number a vessel designed for the carriage by sea of dry bulk commodities such as coal, metal ore, steel products, aggregates, grains or soya Capital Gains Deferral or deferral of CGT as set out in section 150C and Schedule 5B of the CGT Deferral Relief Taxation of Chargeable Gains Act

24 Carry Back Relief CGT Closing Date Company Custodian Agreement dwt Deferred Shares Directors EIS EIS Qualifying Company EIS Relief EIS Shares relief against income tax for the full amount of an investment in an EIS Qualifying Company up to 1,000,000 multiplied by 30% and set against an individual s income tax liability for the tax year preceding that in which EIS shares are issued, save to the extent EIS Relief has already been claimed for the preceding year capital gains tax the final day on which subscriptions may be received by the Promoter, on behalf of the Company, which shall be the earlier of full subscription or 31 March 2014 unless closed for subscription at an earlier date or extended at the discretion of the Directors London Shipping Limited, a company registered in England and Wales with company number the agreement forming the relationship between the Company, the Custodian and the Offshore Custodian deadweight tonnage, a measure of the weight carried by a ship or which can be safely carried by it deferred shares of 1 penny each in the Company having the rights set out in the Articles the directors of the Company, being Braden Harris, Sunil Malhotra and Martin Sherwood the Enterprise Investment Scheme as set out in the Income Tax Act 2007 (as amended) a company that meets the EIS requirements regarding EIS Relief and Capital Gains Deferral relief from income tax under EIS shares in an EIS Qualifying Company which qualify for EIS Relief EIS Qualifying Period the date which is the later of: Start Date (i) the date of issue of the Ordinary Shares; and (ii) the date on which the Company commences its trade (as referred to in section 256 Income Tax Act 2007) Enterprise Excess Exit FCA Handymax HMRC IHT Enterprise Investment Partners LLP the amount by which any sum due to the holders of Ordinary Shares exceeds a specified hurdle which will be 1.25 for each 1 invested in Ordinary Shares a listing, offer for the entire share capital of the Company, a trade sale of its assets and winding up or other capital distribution Financial Conduct Authority a mid-size bulk carrier of between 40,000 and 60,000 tonnes HM Revenue & Customs inheritance tax Information Memorandum this document Investment an Investor s holding of Ordinary Shares in the Company 23

25 Investor IRR Management Services Agreement Maximum Subscription Minimum Subscription Non-Dom NOR Offer Offer Price Offshore Custodian Ordinary Shares or Shares Promoter Promoter Agreement Qualifying Investment Receiving Agent Retail Prices Index or RPI Shareholder Tax Advantages unlisted a person who completes an Application Form which is accepted by the Promoter and subscribes for Shares internal rate of return an agreement to be entered into between the Company and British Marine governing the services to be provided to the Company by British Marine the aggregate maximum subscription of 5.0 million by Investors pursuant to the Offer the aggregate minimum subscription of 3.5 million by Investors pursuant to the Offer an individual who is resident, but not domiciled, in the UK an individual who is resident and domiciled in the UK, but not ordinarily resident in the UK the arrangements whereby Investors will subscribe for Ordinary Shares in the Company as contained within and subject to the terms of this document 1 per Ordinary Share such person or persons as the Company may appoint to provide, and which the Company has agreed terms for, safe custody, custodial and nominee services in respect of the Company for services outside the UK and at the date of this Supplement is Woodside Corporate Services Limited ordinary shares of 1 penny each in the capital of the Company Enterprise Investment Partners LLP, which is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FRN ) an agreement to be entered into between Enterprise and the Company governing the services to be provided to the Company by Enterprise a qualifying investment for the purposes of BIR as further detailed in Part B of Part II of this document Woodside Corporate Services Limited the measure of UK inflation (which includes the cost of mortgage interest payments) published each month by the Office for National Statistics a holder of Ordinary Shares or A Ordinary Shares the various tax advantages including EIS Relief and CGT Deferral Relief, arising from subscriptions for shares in EIS Qualifying Companies through the Company with reference to a company means a company not listed or quoted on an investment exchange or whose shares are not, with the agreement or approval of any officer of the relevant company, the subject of information published for the purpose of facilitating deals in the shares or indicating prices at which persons may be willing to deal 24

26 Part IV GENERAL INFORMATION ABOUT THE COMPANY 1. THE COMPANY 1.1 The Company was incorporated in England and Wales under Companies Act 2006 as a private limited company with the name London Shipping Limited and registered number The principal legislation under which the Company operates is the Act. 1.2 The liability of members of the Company is limited. 1.3 The accounting reference date of the Company is 30 June in each year. 1.4 The Company, to the extent necessary, shall within the period of 6 months following the Closing Date re-register as a public company. 2. THE SUBSIDIARIES The Company has no subsidiaries. 3. SHARE CAPITAL 3.1 By written resolution dated 13 December 2013 the Directors were authorised to allot without regard to any pre-emption rights contained within the Act for a period of five years an aggregate of 10,000,000 Ordinary Shares, 3,000,000 A Ordinary Shares, and 10,000,000 Deferred Shares. The Directors will seek, where possible, to offer new ordinary shares first to existing shareholders before seeking external investment. 3.2 There are no listed or unlisted securities issued by the Company not representing share capital and there are no convertible securities issued by the Company. 3.3 Save as disclosed in this document no share or loan capital of the Company is under option or agreed conditionally or unconditionally to be put under option. 4. ARTICLES OF ASSOCIATION 4.1 General A summary of the principle provisions of the Articles is set out below. 4.2 Income Ordinary Shares and A Ordinary Shares shall rank equally for participation in dividends and other income distributions. The Company in general meeting may declare dividends, but no dividend shall exceed the amounts recommended by the Directors. Subject to the Excess the Directors may pay such interim dividends as they think fit and may also pay the fixed dividends payable on any shares of the Company half yearly or otherwise on fixed dates. Deferred Shares shall have no right to participate in dividend or other income distributions. 4.3 Capital Ordinary Shares and A Ordinary Shares shall rank equally for participation in distributions of capital in respect of the amounts paid up on such shares, save that, on an Exit, in respect of any Excess over the hurdle of 1.25 per Ordinary Share the entitlement in respect of such Excess shall be applied so that A Ordinary shareholders shall receive 30% of the Excess and Ordinary Shareholders 70% of the Excess. 4.4 Conversion The sharing of the Excess set out in paragraph 4.3 above is given effect by a proportion of the Ordinary Shares on an Exit converting into Deferred Shares such that ratio of the remaining Ordinary Shares to the A Ordinary Shares is, after such conversion, equal to the ratio of the equity entitlements of the holders of Ordinary Shares to that of the A Shareholders. Deferred Shares may be redeemed by the Company at any time for an aggregate payment of

27 4.5 Voting and General Meetings Subject to any special rights or restrictions attached to any shares, on a show of hands every member who, being an individual, is present in person or, being a corporation, is present by a duly authorised representative, not being himself a member, shall have one vote and on a poll every member shall have one vote for every Ordinary Share or A Ordinary Share of which he is a holder. 4.6 Variation of Rights The rights attached to any class of shares in the capital of the Company may only be varied with the written consent of the holders of three-fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of such holders. 4.7 Alteration of Capital By ordinary resolution the Company may consolidate and divide its share capital into shares of larger amounts or sub-divide its shares or any of them into shares of smaller amount subject to section 630 of the Act or cancel any shares not taken or agreed to be taken at the date of the passing of the resolution. Subject to the provisions of the Act and to any rights conferred on the holders of any class of shares, the Company may by special resolution reduce the number of shares the Directors are authorised to allot or any capital redemption reserve, share premium account in any manner authorised by law. 4.8 Transferability Subject to the pre-emption rights described in paragraph 4.9 below, shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the Directors, which is executed by or on behalf of the transferor. The Directors may not charge a fee for registering any instrument of transfer or other document relating to or affecting the title to any share but the Company may retain any instrument of transfer which is registered. The transferor remains the holder of a share until the transferee s name is entered in the register of members as holder of it. The Directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent. If a member transfers (or purports to transfer) a share other than in accordance with the Articles, he shall be deemed to have immediately served a Transfer Notice in respect of all shares held by him. 4.9 Pre-emption on Transfer of Shares Save where any transfer is permitted as set out in the Articles, a member who wishes to transfer any of his shares must, before transferring or agreeing to transfer any shares, give notice in writing to the Company specifying the number of shares he proposes to transfer, the price and the identity of the proposed transferee (Transfer Notice). The Company will then offer the relevant members shares for sale to the other members. If following 20 business days some of those shares have not been allocated to existing members then they may be sold to the proposed transferee named in the Transfer Notice. The sale price of the shares specified in the Transfer Notice shall be Fair Value as defined in the Articles and as decided by an independent expert Drag and Tag Rights At any time after the date falling three years after the EIS Qualifying Period Start Date, if members holding at least a simple majority of the Ordinary Shares and a simple majority of the A Ordinary Shares wish to transfer any interest in shares to a bona fide arm s length purchaser, the selling Shareholders shall have the option to require all the other holders of shares to transfer all their shares to the proposed buyer. 26

28 Similarly, if members holding at least a majority of the Ordinary Shares propose to sell, in one or a series of related transactions, a majority in nominal value of the shares to any person, the proposed sellers may only sell if they comply with the provisions of this Article. The proposed sellers shall give written notice to the other shareholders of all classes of the intended sale at least ten business days prior to the proposed sale date. Any other Shareholder shall be entitled, by written notice given to the proposed sellers within five business days of receipt of the sale notice, to require the proposed sellers to procure that the proposed buyer shall make an offer to buy all of his shares on the same terms and conditions as those set out in the sale notice Dividends If twelve years have passed from the date on which a dividend became due for payment, and the distribution recipient has not claimed it, then the distribution recipient is no longer entitled to that dividend and it ceases to remain owing by the Company Borrowing and Other Powers The Directors are responsible for the management of the Company s business, for which purpose they may exercise all the powers of the Company Directors Conflicts of Interest The Directors may, in accordance with the requirements set out below, authorise any matter or situation proposed to them by any Director which would, if not authorised, involve a Director (an Interested Director) breaching his duty under section 175 of the Act to avoid conflicts of interest (Conflict). Any authorisation under this Article will be effective only if: the matter in question shall have been proposed by any Director for consideration in the same way that any other matter may be proposed to the Directors under the provisions of these Articles or in such other manner as the Directors may determine; any requirement as to the quorum for consideration of the relevant matter is met without counting the Interested Director; and the matter was agreed to without the Interested Director voting or would have been agreed to if the Interested Director s vote had not been counted. Any authorisation of a Conflict under this Article may (whether at the time of giving the authorisation or subsequently): extend to any actual or potential conflict of interest which may reasonably be expected to arise out of the matter or situation so authorised; provide that the Interested Director be excluded from the receipt of documents and information and the participation in discussions (whether at meetings of the Directors or otherwise) related to the Conflict; provide that the Interested Director shall or shall not be an Eligible Director in respect of any future decision of the Directors in relation to any resolution related to the Conflict; impose upon the Interested Director such other terms for the purposes of dealing with the Conflict as the Directors think fit; provide that, where the Interested Director obtains, or has obtained (through his involvement in the Conflict and otherwise than through his position as a Director of the Company) information that is confidential to a third party, he will not be obliged to disclose that information to the Company, or to use it in relation to the Company s affairs where to do so would amount to a breach of that confidence; and permit the Interested Director to absent himself from the discussion of matters relating to the Conflict at any meeting of the Directors and be excused from reviewing papers prepared by, or for, the Directors to the extent they relate to such matters. 27

29 Where the Directors authorise a Conflict, the Interested Director will be obliged to conduct himself in accordance with any terms and conditions imposed by the Directors in relation to the Conflict. The Directors may revoke or vary such authorisation at any time, but this will not affect anything done by the Interested Director, prior to such revocation or variation, in accordance with the terms of such authorisation. A Director, notwithstanding his office, may be a Director or other officer of, employed by, or otherwise interested (including by the holding of shares) in his appointor(s) (or any Permitted Transferee of such appointor(s)) and no authorisation under this Article shall be necessary in respect of any such interest. An Investor Director shall be entitled from time to time to disclose to any Investor (and to any Permitted Transferee of an Investor) such information concerning the business and affairs of the Company as he shall at his discretion see fit. A Director is not required, by reason of being a Director (or because of the fiduciary relationship established by reason of being a Director), to account to the Company for any remuneration, profit or other benefit which he derives from or in connection with a relationship involving a Conflict which has been authorised by the Directors in accordance with these Articles or by the Company in general meeting (subject in each case to any terms and conditions attaching to that authorisation) and no contract shall be liable to be avoided on such grounds Directors Remuneration Directors may undertake any services for the Company that the Directors decide and are entitled to such remuneration as the Directors determine, which may take any form, and include any arrangements in connection with the payment of a pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect of that Director. Unless the Directors decide otherwise, Directors remuneration accrues from day to day. The Company may pay any reasonable expenses which the Directors properly incur in connection with their attendance at meetings of Directors or committees of Directors, general meetings, or separate meetings of the holders of any class of shares or of debentures of the Company, or otherwise in connection with the exercise of their powers and the discharge of their responsibilities in relation to the Company. 5. DIRECTORS 5.1 With the exception of the indirect interest of the Directors A Ordinary Shares, none of the Directors has any other interest, whether beneficial or non beneficial, in any share capital of the Company. 5.2 Each of the Directors is party to a letter of appointment with the Company governing their appointment as a director. A director is not entitled to be paid any fee, and each appointment is for an initial term of three years unless otherwise terminated on one month s notice. 5.3 There are no loans or guarantees provided by the Company for the benefit of any Director None of the Directors has at any time had a conviction for any offence (other than an offence under the road traffic legislation in respect of which a custodial sentence was not imposed on him), been declared bankrupt, entered into a voluntary arrangement with his creditors or has received a public criticism from any professional, statutory or regulatory authority, or been disqualified from acting as a Director of a company or been a Director of any company at the time or within 12 months preceding any bankruptcy, receivership or liquidation. 28

30 5.4 None of the Directors has or has had any interest, direct or indirect in any assets which have been or are proposed to be acquired or disposed of by or leased to any member of the Company, or any such interest in any contract or arrangement subsisting at the date of this document and which is significant in relation to the business of the Company. 5.5 In the five years prior to the date of this document, the Directors have held the following directorships (excluding those of the Company): Name Current Directorships Resigned within the last five years Braden Harris Jupiterpoint Ltd Bralie Properties Ltd 41 Lancaster Grove Ltd Acre Equity Investments PLC (formerly St Helens Finance PLC) Allocean Maritime Ltd Allocean Maritime Investments Ltd Allocean Maritime Investments M/T 1 Ltd Cleaves Shipbroking Ltd Cleaves & Company Ltd Sunil Malhotra Anglia Maritime Ltd OBC International Ltd BR Ships Ltd Ocean Bulk Carriers Ltd British Marine PLC Britmar (UK) Ltd Britmar Ltd Clementine Shipping Ltd Diamond Jubilee Ltd Dorset Shipping Ltd Eminence Shipping Ltd Excalibur Shipping Ltd Flagships Ltd Gloriana Ltd Gwedolen Shipping Ltd L Bridge Ltd Meridian Navigator Ltd Miranda Rose Ltd Ocean Clementine Ltd Ocean Gwendolen Ltd Oceanic Transport Ltd Pride Shipping Ltd Spotclass Shipping Ltd Trademar Ltd Trafalgar Seaways Ltd Volumnia Shipping Ltd Martin Sherwood Bedwell Park Solar Ltd South to South UK Ltd Bentwaters Park Solar Limited British Country Inns PLC British Country Inns 2 PLC British Country Inns 3 PLC British Country Inns 4 PLC Chells Park Ltd EIS Association Ltd Halcyon Hotels and Resorts PLC Merepark Solar Ltd Retail Detail Ltd 99 Clarendon Road Tenants Association Ltd 29

31 6. MATERIAL CONTRACTS The Company has entered into the following contracts (not being contracts entered into in the ordinary course of business) which are, or may be, material: 6.1 Under the Promoter Agreement, Enterprise has been appointed as agent of the Company to use its reasonable endeavours to procure subscribers for the Ordinary Shares under the Offer at the Offer Price. Enterprise has agreed to provide administrative services to the Company in connection with it maintaining its eligibility under the EIS and the provision of company secretarial, investor relations and non-executive director services to the business. Enterprise is entitled to be paid an annual fee equal to 0.5% of the gross amount invested in the Company (plus applicable VAT) payable quarterly in arrears, or 0.85% where trail commission is involved. Enterprise will be responsible for paying from this fee any trail commission opted for by Intermediaries authorised under FSMA of 0.35% of funds introduced per annum, payable annually, until the earlier of an Investor ceasing to be a holder of Shares or the fourth anniversary of the Closing Date. Enterprise s obligations under the Promoter Agreement are conditional, inter alia, on the issue of Ordinary Shares on the Minimum Subscription under the Offer being reached. The Promoter Agreement provides for the Company to pay Enterprise a commission of 6% of the aggregate gross proceeds of the Offer (plus applicable VAT) from which Enterprise will pay various costs of the Offer, including commissions to authorised intermediaries and introducers. In addition, Enterprise as a holder of A Ordinary Shares is entitled to share in the Management Incentive, as described on page 10 of Part I of this document. 6.2 An asset manager agreement (Asset Manager Agreement) will be entered into between the Company and British Marine under which British Marine will provide the following services: Identifying and evaluating a suitable vessel for the Company to acquire and carrying out the necessary checks and audits to enable the acquisition, and to negotiate the final terms of acquisition. Preparing statutory accounts and tax filings as required. Keeping the Company up to date with developments in the shipping industry. Making arrangements for the sale of the vessel. 6.3 A management services agreement (Management Services Agreement) covering the commercial and technical management of the vessel will be entered into between the Company and British Marine. Under this agreement British Marine will be appointed to provide the following services: Preparing budgets for the vessel for a three year period. Arranging all legal, registration and classification requirements of the vessel. Procuring suitable charters for the vessel. Dealing with commercial disputes should they arise. Arranging insurance for the vessel. Making the necessary arrangements for the Company to qualify for Tonnage Tax, including the training of cadets. Selecting and advising on the engagement of the vessel s crew, their transportation and repatriation. Daily monitoring of the vessel s performance, and supervision of the maintenance and general efficiency of the vessel. Arranging dry docking, repairs, alteration and the general upkeep of the vessel. Arranging the supply of stores, spares and provisions. Appointment of surveyors and technical consultants as appropriate. Maintaining records of all costs and expenditure incurred. Providing management accounts on a monthly basis, to include income and profit on an actual and budgeted basis. Arranging appropriate loan or mortgage facilities for the vessel. Arranging hedging contracts for the Company. Arranging for independent valuation of the vessel as appropriate. Arranging foreign exchange contracts for the Company. 30

32 Fees payable under the Management Services Agreement are set out in the assumptions on pages 9 and LITIGATION The Company is not engaged in legal or arbitration proceedings, active (or so far as the Company is aware pending or threatened) against, or being brought by, the Company which are having or may have a significant effect on the Company s financial position. 8. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents may be inspected at the offices of TLT LLP at 20 Gresham Street, London EC2V 7JE during usual business hours on any week day (Saturday and public holidays excepted) for a period of 28 days following the date of this document: 8.1 the Articles of Association of the Company; 8.2 the Promoter Agreement; 8.3 the Management Services Agreement. 9. COPIES OF THIS DOCUMENT Copies of this document will be available free of charge from the offices of TLT LLP at 20 Gresham Street, London EC2V 7JE (Ref: RT01/085849/000005) and shall remain available for at least 28 days after the closing of the Offer. 31

33 DIRECTORS AND ADVISERS Directors Promoter and EIS Adviser Solicitors to the Company Auditors Company Secretary and Registrar Registered Office Receiving Agent and Custodian Braden Harris Sunil Malhotra Martin Sherwood Enterprise Investment Partners LLP (an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority) Hyde Park House 5 Manfred Road London SW15 2RS TLT LLP 20 Gresham Street London EC2V 7JE BDO LLP 55 Baker Street London W1U 7EU Derringtons Limited Hyde Park House 5 Manfred Road London SW15 2RS Hyde Park House 5 Manfred Road London SW15 2RS Woodside Corporate Services Limited 4th Floor 50 Mark Lane London EC3R 7QR 32

34 Part V GENERAL INFORMATION ABOUT THE OFFER Schedule 1 1. CHARGES AND EXPENSES No fees or costs will be charged to Investors. Enterprise will be entitled to an initial commission of 6%, plus VAT, of the amount invested in the Company and out of this it will pay all commissions and all professional charges and expenses associated with issuing the Offer. Investors should therefore be able to obtain tax relief on the full amount of their investment. In addition to the initial commission, Enterprise will be entitled to an annual fee of 0.5% of the funds invested in the Company by Investors from the date of investment and subsequently each year, plus VAT (or 0.85% plus VAT where trail commission is involved). This fee will be payable in arrears on a calendar quarterly basis. 2. HOW TO INVEST Subject to the right of cancellation set out below submitting an Application Form represents a binding and irrevocable commitment to invest in the Company and agreement to be bound by the terms of the Application Form. 3. APPLICATIONS Applications should be made in accordance with the terms and conditions of application in Schedule 2 below of this document. 4. NON-UK APPLICANTS No person receiving a copy of this document in any territory other than the UK may treat this document as constituting an invitation or offer to him, nor should he in any event make any application for Ordinary Shares unless, in the relevant territory, such an invitation or offer could lawfully be made to him or such application could lawfully be made without contravention of any registration or other legal requirements. It is the responsibility of any person outside the UK wishing to make an application hereunder to satisfy himself as to full observance of the laws of any relevant territory in connection therewith, including obtaining any requisite governmental or other consents, observing any other formalities requiring to be observed in such territory and paying any issue, transfer or other taxes required to be paid in such territory. The Directors of the Company reserve the right to request confirmation from any Investor s attorney as to the ability of a non-uk applicant to subscribe lawfully for the Offer. 5. GENERAL The information presented herein was prepared by the Company and is being furnished by the Company solely for use by prospective investors in connection with the Offer. Neither the Company nor Enterprise Investment Partners LLP is making any representation as to its future performance. This investment memorandum (together with any amendments or supplements and any other information that may be furnished to prospective investors by the Company) contains or may contain certain statements, estimates and forward looking projections of the Company with respect to the anticipated future financial performance of the Company. Such statements, estimates and forward looking projections are based on various assumptions of management about future events and circumstances, many of which will not be within the control of the Company and its management and may or may not prove to be correct. The Company believes that such estimates and other assumptions are reasonable under the circumstances, but no representation, warranty or other assurance is given that such statements, estimates and projections will be realised. There will be variances between such projections and actual events and results and such variations will likely be material. 33

35 Prospective investors are not to construe the contents of this document as constituting legal or tax advice. Each investor should consult his or her personal lawyer, accountant and other advisor(s) as to legal, tax, economic and related aspects of the investment described herein and its suitability for such investor. This investment memorandum does not constitute a solicitation of an offer to sell to or buy from, anyone in any country or in any jurisdiction in which such an offer or solicitation is not authorised. Except as otherwise indicated, this document speaks as of the date hereof. Neither the delivery of this document nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the Company after the date hereof. 6. MONEY LAUNDERING REGULATIONS 2007 It is a term of the Offer that, to ensure compliance with the Money Laundering Regulations 2007 the Company is entitled to require, at its absolute discretion, verification of identity from any Applicant. Pending the provision of evidence satisfactory to the Company as to the identity of the Applicant and/or the cheque or other remittance relating thereto the Company shall not be obliged to register the Ordinary Shares in the name of any potential Investor. If verification of identity is so required, this may result in a delay in dealing with an application and in ultimate rejection. The Company reserves the right, in its absolute discretion, to reject any application in respect of which the Company considers that, having requested verification of identity, it has not received evidence of such identity satisfactory to it by such time as may be specified in the request for verification of identity or in any event within a reasonable period. In the event of an application being rejected in any such circumstances, the Company reserves the right in its absolute discretion, but shall have no obligation, to terminate any contract of allotment related to or constituted by any application (but without prejudice to any rights the Company may have to take proceedings to recover in respect of loss or damage suffered or incurred by it as a result of the failure to produce satisfactory evidence as aforesaid). The Company shall not be responsible or have any liability for loss or damage (whether actual or alleged) arising from the election by the Company to treat an application for Ordinary Shares lodged by any Applicant as invalid or to terminate the contract of allotment as a result of the Company not having received evidence as to the identity of the Applicant reasonably satisfactory to it within a reasonable time of having requested such information. The making of all applications, acceptances of applications and contracts resulting therefrom under the Offer shall be governed by and construed in accordance with English law, and each party submits to the jurisdiction of the English courts. Schedule 2 TERMS AND CONDITIONS OF APPLICATION The Offer is being made by the Company. Applicants are encouraged to submit their Application Forms early in order to be confident that their Applications will be successful. Applications must be made on the accompanying Application Form. No Application will be accepted unless it is made on an original Application Form. TERMS AND CONDITIONS OF APPLICATION 1. The contract created by the acceptance of applications under the Offer will be conditional upon the Minimum Subscription being received by 31 March 2014 unless extended or closed for subscription by the Promoter at an earlier date. 2. The right is reserved by the Company to present all cheques and bankers drafts for payment on receipt and to retain surplus application monies pending clearance of successful Applicants cheques. The Company reserves the right to reject, in whole or in part, or to scale down, any application. If any application is not accepted in full, or is accepted for fewer Ordinary Shares than the number applied for, or if any contract created by acceptance does not become unconditional, the application monies or, as the case may be, 34

36 the balance thereof will be returned (without interest) by transfer to the originating bank account within seven days of the closing of the Offer. The Company reserves the right to treat as valid and binding upon the Applicant any application, even if the accompanying Application Form is not completed in all respects in accordance with the instructions or is not accompanied by the power of attorney where necessary. The right is reserved to reject any application in respect of which the Applicant s cheque or banker s draft has not been cleared on first presentation. Notifications of acceptance or non-acceptance will not be issued pending issue of definitive certificates for the Ordinary Shares or return of application monies (as the case may be). 3. By completing and delivering an Application Form each Applicant: i. offers to subscribe under the Offer for the number of Ordinary Shares specified in his Application Form (or such lesser number for which his application is accepted) at the Offer Price on the terms of and subject to this document, including these terms and conditions, and the Memorandum and Articles of Association of the Company; ii. warrants that his remittance will be honoured on first presentation and agrees that if such remittance is not so honoured, he will not be entitled to receive a share certificate in respect of the Ordinary Shares applied for or to enjoy or receive any rights or distributions in respect of any Ordinary Shares unless and until he makes payment in cleared funds for such Ordinary Shares and such payment is accepted by the Company (which acceptance shall be in its absolute discretion and may be on the basis that he indemnifies the Company against all costs, damages, losses, expenses and liabilities arising out of or in connection with the failure of his remittance to be honoured in first presentation) and that, at any time prior to unconditional acceptance by the Company of such late payment in respect of such Ordinary Shares, the Company (without prejudice to any other rights) may avoid the agreement to allocate such Ordinary Shares to him and may re-allocate Ordinary Shares to some other person, in which case he will not be entitled to any refund or payment in respect of such Ordinary Shares (other than the refund to him at his risk of any proceeds of the cheque or bankers draft accompanying this application, without interest); iii. agrees that any monies returnable to him may be retained by the Company pending clearance of his remittance and that such monies will not bear interest; iv. agrees that applications which are settled by way of a third party payment, e.g. bankers draft, building society cheque or a cheque drawn by someone other than the Applicant, will be subject to the UK s verification of identity requirements which are contained in the Money Laundering Regulations 2007 as amended, updated, replaced or superseded from time to time; v. agrees with the Company promptly, on request, to disclose in writing any information which it may request in connection with his application and authorises the Company to disclose any information relating to his application it may consider appropriate; vi. agrees that any definitive share certificate to which he might become entitled and monies to be returned to him may be retained pending clearance of his remittance or pending investigation of any suspected breach of the warranties of this Schedule 2 and that such monies will not bear interest; vii. agrees that all applications, acceptance of applications and contracts resulting therefrom under the Offer shall be governed by and construed in accordance with English law, and that he submits to the jurisdiction of the English Courts and agrees that nothing shall limit the right of the Company to bring any action, suit or proceedings arising out of it in connection with any such applications, acceptances of applications and contracts in any other manner permitted by law or in any court of competent jurisdiction; viii. confirms that in making such application he is not relying on any information or representation in relation to the Company other than the information contained in this document and accordingly he agrees that no person responsible solely or jointly for this document or any part thereof or involved in the preparation thereof shall have any liability for any such other information or representation; 35

37 ix. agrees that, having had the opportunity to read this document, he shall be deemed to have had notice of all information and representations concerning the Company contained therein; x. confirms and warrants that he has read and complied with paragraph 4 below; xi. warrants that he is not under the age of 18; xii. agrees that all certificates, documents, monies and cheques sent by post to, by or on behalf of the Company or to an Investor will be sent at the risk of the person(s) entitled thereto to the address specified in the Application Form (or in the case of multiple Applicants the first named); xiii. warrants that, if an Application Form is signed on behalf of somebody else, the signatory has the authority to do so and such person will be bound accordingly and will be deemed also to have given the confirmations, warranties and undertakings contained in these terms and conditions; xiv. warrants that no other application (not being an application under the terms of the Application Form) is being made by him for his own account or by another on his behalf or for benefit and with his knowledge for such purpose or, if he is applying as agent or nominee of another, that no other application is being made by him (not being an application as aforesaid) as an agent or nominee for that other person and that other person is not, to his knowledge, acting in concert with any other person or persons as aforesaid; xv. warrants that, in connection with the application he has observed the laws of all relevant territories, obtained any requisite governmental or other consents which may be required, complied with all requisite formalities and paid any issue, transfer or other taxes due in connection with his application in any territory, other than stamp duty or SDRT, and that he has not taken any action which will or may result in the Investor or the Company or any of their respective directors, officers, agents or employees acting in breach of the regulatory or legal requirements of any territory in connection with the Offer or the application; xvi. authorises the Company or the Investor or their agents to do all things necessary to effect registration into the Applicant s name(s) of any Ordinary Shares for which his application is accepted and authorise any representative of the Company or the Promoter to execute and/or complete any document of title required; and xvii. agrees that none of the Company, Enterprise or the Receiving Agent shall be liable to any Applicant in the event of an insolvency of any bank with which any funds held by the Receiving Agent have been deposited nor in the event of any restriction on the ability of the Receiving Agent to withdraw funds from such banks for reasons beyond the Receiving Agent s control. 4. No person receiving a copy of this document or an Application Form in any territory other than the United Kingdom may treat the same as constituting an invitation or offer to him, nor should he in any event use such Application Form unless, in the relevant territory, such an invitation or offer could lawfully be made to him or such Application Form could lawfully be used without contravention of any registration or other legal requirements. It is the responsibility of any person outside the United Kingdom wishing to make an application hereunder to satisfy himself as to full observance of the laws of any relevant territory in connection therewith, including obtaining any requisite governmental or other consents, observing any other formalities requiring to be observed in such territory and paying any issue, transfer or other taxes required to be paid in such territory. 5. Save where the context otherwise requires, words and expressions defined in this document have the same meaning when used in the Application Form and any explanatory notes in relation thereto. DOCUMENTS OF TITLE Application Forms must be sent by post or delivered by hand to Woodside Corporate Services Limited, 4th Floor, 50 Mark Lane, London EC3V 7QR together with the appropriate remittance, so as to be received no later than 12 noon on 31 March 2014 in respect of the Offer. The subscription 36

38 list will open at am on 7 January 2014 and will close, if the Minimum Subscription is received by the Company, at 12 noon on 31 March 2014 in respect of shares to be issued in the 2013/2014 tax year, or, in either case, if the Minimum Subscription has been achieved prior to that date. Once the Minimum Subscription has been achieved the Directors will proceed to allot and issue Ordinary Shares. Temporary documents of title will not be issued. Definitive share certificates will be despatched by first class post within 21 days of the allotment and issue of Ordinary Shares under the Offer, pending which, transfers will be certified against the register. Allotments of Ordinary Shares will be made at the discretion of the Board. You can either send a cheque made payable to Woodside Corporate Services Limited London Shipping Client Account or make an online transfer to The Royal Bank of Scotland plc, London St Mary Axe Branch, sort code , account number , account name Woodside Corporate Services Limited London Shipping 2 Client Account. For Non-Doms/NORs, payment should be sent to Schroder (CI) Limited, Guernsey, IBAN GB29SCHD , account number , account name Woodside Corporate Services Limited No 5 client account. MONEY LAUNDERING REGULATIONS It is a term of the Offer that, to ensure compliance with the Money Laundering Regulations 2007 as amended, updated, replaced or superseded from time to time, the Company and/or the Promoter and/or the Receiving Agent may at its absolute discretion require verification of identity from any person lodging an Application Form and, without prejudice to the generality of the foregoing, in particular any person who either (i) tenders payment by way of cheque or bankers draft drawn on an account in the name of a person or persons other than the Applicant or (ii) appears to be acting on behalf of some other person. In the former case, verification of the identity of the Applicant may be required. In the latter case, verification of the identity of any person on whose behalf the Applicant appears to be acting may be required. To help us verify your identity we may use the details you supply to make electronic searches about you at credit reference agencies who will supply us with information from specific databases, including information from the Electoral Register and fraud prevention agencies. This information will be used solely for the purpose of verifying your identity and address. In some instances we may need to ask you for further information or documents. If within a reasonable period of time following a request for verification of identity and in any case by no later than 3.00 pm on the relevant date of allotment the Company and/or the Promoter and/or the Receiving Agent has not received evidence satisfactory to it as aforesaid, the Company with the agreement of the Company may, at its absolute discretion, reject any such application in which event the remittance submitted in respect of that application will be returned to the Applicant (without prejudice to the rights of the Company to undertake proceedings to recover any loss suffered by it as a result of the failure to produce satisfactory evidence of identity). Where possible Applicants should make payment by their own cheque. If a third party cheque, bankers draft or building society cheque is used, the Applicant should: (a) write his/her name and address on the back of the draft or cheque and, in the case of an individual, record his/her date of birth against his/her name; and (b) ask the bank or building society to endorse on the reverse of the draft or cheque the full name and account number of the person whose account number is being debited and stamp such endorsement. In any event, if it appears to the Company and/or the Promoter that an Applicant is acting on behalf of some other person, further verification of the identity of any person on whose behalf the Applicant appears to be acting will be required. In relation to any application in respect of which the necessary verification of the identity of the Application or the person on whose behalf of any Applicant appears to be acting has not been received on or before 3.00 pm on the relevant ate of allotment, the Company will treat the relevant application as invalid and application monies will be returned (without interest). The above information is provided by way of guidance to reduce the likelihood of difficulties, delays and potential rejection of an Application Form (but without limiting the Company s the 37

39 right to require verification of identity as indicated above). Schedule 3 HOW TO COMPLETE THE APPLICATION FORM 1. Insert (in figures) the number of Ordinary Shares for which you are applying and the amount of your cheque or banker s draft. Applications must be for a minimum amount of 10,000 and thereafter in multiples of 5, Insert your full name and address in BLOCK CAPITALS and sign and date the Application Form. Joint applications should preferably be made on separate application forms. Where an application must be made in joint names this must be clearly specified on the Application Form. 3. UK resident individuals: Make your payment for your subscription electronically as set out on the UK resident Application Form on page 39 or affix a cheque or a banker s draft for the amount specified being the subscription price of the Ordinary Shares payable to Woodside Corporate Services Limited London Shipping 2 Client Account and crossed a/c Payee. No receipt will be issued for this payment. Your cheque or banker s draft must be drawn in sterling on an account at a bank (which must be in the UK, the Channel Islands or the Isle of Man) which is in your own name. The right is reserved to reject any application in respect of which the Applicant s cheque or banker s draft have not been cleared on first presentation. Applications may be accompanied by a cheque or banker s draft drawn by someone other than the Applicant but any monies to be returned will be sent by crossed cheque in favour of the person named on the Application Form. Send your cheque or banker s draft and completed Application Form to Woodside Corporate Services Limited, 4th Floor, 50 Mark Lane, London EC3R 7QR. 4. Non Doms: Make your payment for your subscription electronically as set out on the Non Dom Application Form on page 41. Send your completed Application Form to Woodside Corporate Services Limited, 4th Floor, 50 Mark Lane, London EC3R 7QR. 38

40 APPLICATION FORM UK RESIDENT INDIVIDUALS Please print CLEARLY in BLACK INK and in BLOCK CAPITALS Please send your completed Application Form and Anti-Money Laundering Documentation to: Woodside Corporate Services Ltd, 4th Floor, 50 Mark Lane, London EC3R 7QR. FOR CHEQUE PAYMENTS Make your cheque payable to Woodside Corporate Services Limited London Shipping 2 Client Account and send it, together with this completed Application Form and anti-money laundering documentation described in part 3 of the Application Form below, to Woodside Corporate Services Ltd, 4th Floor, 50 Mark Lane, London EC3R 7QR. FOR ONLINE TRANSFERS The Royal Bank of Scotland plc, London St. Mary Axe branch Sort Code: Account number: Account name: WOODSIDE CORPORATE SERVICES LIMITED LONDON SHIPPING 2 CLIENT ACCOUNT 1. Personal Details and Correspondence Address Title: Forename(s): Surname: Address: Postcode: Previous Address (if less than 3 years at current address): Postcode: Tel No: Tax District: Date of Birth: NI No: Tax Reference: Name of Adviser: Name of Firm: Firm Address: Postcode: Firm Firm FCA Number: Tel No: Fax No: Commission: authorised intermediaries may choose to take either an initial commission of 3%, or 2% plus an annual Trail of 0.35% until the earlier of Exit or the expiry of four years. Please tick below 3% 2% plus Trail Adviser Confirmation I confirm that I have assessed the suitability of this investment for the Investor. Signature of Adviser:... Date... Shares in lieu of Adviser Charge I elect to take no Commission and for a sum equal to 3% of my Subscription to receive extra shares in the Company on behalf of my client (please note these shares may be subject to tax). 39 Yes No

41 40

42 APPLICATION FORM NON-DOM/NOR INDIVIDUALS Please print CLEARLY in BLACK INK and in BLOCK CAPITALS Please send your completed Application Form and Anti-Money Laundering Documentation to: Woodside Corporate Services Ltd, 4th Floor, 50 Mark Lane, London EC3R 7QR. FOR APPLICATIONS Send this completed Application Form and anti-money laundering documentation described in part 3 of the Application Form below, to Woodside Corporate Services Ltd, 4th Floor, 50 Mark Lane, London EC3R 7QR. FOR ONLINE TRANSFERS Schroder (CI) Limited, Guernsey IBAN: GB29SCHD Account number: Account name: WOODSIDE CORPORATE SERVICES LIMITED No 5 CLIENT ACCOUNT 1. Personal Details and Correspondence Address Title: Forename(s): Surname: Address: Postcode: Previous Address (if less than 3 years at current address): Postcode: Tel No: Tax District: Date of Birth: NI No: Tax Reference: Name of Adviser: Name of Firm: Firm Address: Postcode: Firm Firm FCA Number: Tel No: Fax No: Commission: authorised intermediaries may choose to take either an initial commission of 3%, or 2% plus an annual Trail of 0.35% until the earlier of Exit or the expiry of four years. Please tick below 3% 2% plus Trail Adviser Confirmation I confirm that I have assessed the suitability of this investment for the Investor. Signature of Adviser:... Date... Shares in lieu of Adviser Charge I elect to take no Commission and for a sum equal to 3% of my Subscription to receive extra shares in the Company on behalf of my client (please note these shares may be subject to tax). 41 Yes No

43 42

44 TO BE COMPLETED BY ALL INDIVIDUALS 2. Amount of Investment (minimum 10,000 and upwards in increments of 5,000) Do you intend to claim EIS Relief? Yes No If yes, please indicate which tax year. 2013/ /2013 (Carrying Back) 3. Identification In order to comply with current Anti-Money Laundering Regulations, we require two proofs of identity; one proof of your home address and one photographic proof of identity. Please tick to indicate which of the following forms of identification are enclosed with your application. Certified Certified Utility Bank Local Credit Copy of Copy of Bill Statement Authority Card Passport Photocard Tax Bill Statement Driving Licence Identity A copy of your current passport or photo driving licence certified by a solicitor with a current UK practicing certificate, an accountant or an FCA approved adviser. The passport or photo driving licence must be certified as a true copy of the original by personal signature of the solicitor, accountant, adviser (it cannot be signed in the name of their firm) and using blue ink (in order to distinguish the certification from a black and white photocopied document and there must be six months left to run, in the case of your passport. The name of the signatory must also be printed underneath the signature. Address Please submit one of the following which (with the exception of a UK driving licence) must be dated no earlier than 3 months before the date of your application, either in original form or certified by a solicitor with a current UK practicing certificate, an accountant or an FCA approved adviser. current and valid UK driving licence (paper-style UK provisional licences are not acceptable). Do not send a current and valid driving licence as evidence of both the Identification and Address; utility bill, i.e. gas, electricity, water or telephone bill (but not a mobile telephone bill); most recent bank, building society or credit card statement (MasterCard or Visa only); or local authority tax bill for the current year. Woodside will return your original documents to you by first class post (or special delivery, if it considers this to be more appropriate). 4. Declaration/Terms & Conditions I, the Investor, confirm that: (a) I wish to seek EIS Relief for my investment; (b) I am applying on my own behalf; (c) I will notify Enterprise if I am connected to the Company, as defined in Sections 166, 167, 170 and 171 of Income Tax Act 2007; (d) I will notify the Enterprise if, within the period of three years from the date of issue of Shares in the Company, I become connected with the Company or receive value from the Company; 43

45 (e) (f) (g) (h) (i) (j) I have read the Information Memorandum and understood the section headed Risk Factors on pages 18 to 21; I acknowledge that Enterprise is not providing investment, legal, financial, tax or other advice and that any tax information provided is in the context of a subscription into the Company under the offer; I am a person to whom the Information Memorandum may lawfully be distributed without contravention of The Financial Services and Markets Act 2000; I agree to be bound by the Articles of Association of the Company and acknowledge that a 30% Success Fee will be deducted from any Exit proceeds above the Hurdle of 1.25 per share; The Receiving Agent shall not be liable to me in the event of an insolvency of any bank with which any funds held by the Receiving Agent have been deposited nor in the event of any restriction on the ability of the Receiving Agent to withdraw funds from such bank for reasons which are beyond its reasonable control; I have advised Enterprise if I am a solicitor or accountant or other professional person who is subject to professional rules preventing me from making investments, in particular in the Company; (k) I have supplied the correct anti-money laundering documents set out on page 43; (l) (m) (n) (o) I recognise that the Company is a speculative venture; I am aware of the aims and objectives of the Company and the nature of its activities; I recognise that there is no established market for interests in the Company, that it is not expected that there will be such a market at any time, as the transferability of such interests is restricted, and that I may have difficulty in selling my shares or in obtaining reliable information about their value; I have the financial ability to bear economic risk of my investment, have adequate means for providing for any current needs and possible contingencies and no need for liquidity of my investment in the Company. Signature Date APPLICATION CHECKLIST Have you 1. read this Information Memorandum in full and, in particular, the Risk Warnings? 2. fully completed the Application Form and signed and dated it? 3. subscribed for at least the minimum investment of 10,000 and upwards increments of 5,000? 4. if you are UK Resident, made sure you have completed the UK Resident Application Form, and included a cheque drawn on a UK bank account in the name of the Applicant payable to Woodside Corporate Services Limited London Shipping 2 Client Account crossed A/C Payee only or paid your subscription monies electronically? and 5. if you are a Non-Dom, made sure you have completed the Non-Dom Application Form, and made an online transfer to Schroder (CI) Limited, Guernsey? IBAN: GB29SCHD Account number: Account name: Woodside Corporate Services Limited No. 5 Client Account 44

46 Enquiries and requests for further copies of this Offer Document should be referred to Enterprise Investment Partners LLP (020) or