First Day of Dealings
SURE VENTURES PLC / ISIN: GB00BYWYZ460 / Ticker: SURE / Market: SFS / Sector: Investment
19 January 2018
SURE VENTURES PLC ('SURE' or 'the Company')
First Day of Dealings
SURE VENTURES PLC, a venture capital fund which invests in early stage software companies in the rapidly growing Financial Technology ('FinTech'), Augmented Reality ('AR'), Virtual Reality ('VR'), and Internet of Things ('IoT') sectors, is pleased to announce that its ordinary shares will commence trading on the Specialist Fund Segment of London Stock Exchange's regulated Main Market at 8.00 a.m. today under the ticker SURE ("Admission"). In tandem with the Admission, the Company has raised £3,309,999 before expenses, through a Placing of 3,309,999 new ordinary shares of no par value at a placing price of £1 each implying a market cap of £3,310,000 on First Admission.
The total number of ordinary shares in issue stands at 3,310,000 and the total number of voting rights in the Company is 3,310,000. There are no shares held in treasury. The figure of 3,310,000 may be used by shareholders as the denominator for the calculation by which they may determine if they are required to notify their interest in, or change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.
Shard Capital Partners LLP is acting as Placing Agent to the Company and Shard Capital AIFM LLP ('SCAIFM') is its manager.
Overview
· Targeting capital growth by investing in early stage technology companies, with a focus on software-centric businesses in three rapidly-growing markets:
o AR/VR - forecast to grow into a US$108 billion industry within the next five years following significant investment in hardware and headsets by major players such as Facebook, Oculus Rift, HTC, Samsung, Microsoft which has increased demand for software /support and content
o FinTech - current transaction value estimated to be US$2.6 trillion which is predicted to grow to US$6.9 trillion in the next 5 years, representing a CAGR of 21.8%, as the Banking, Finance and Insurance industries embrace technology to assist with changing financial regulation, cyber security and evolving payment trends
o IoT - defined as the interconnection via the internet of computing devices embedded in everyday objects enabling them to send and receive data, was estimated to be worth US$120 billion dollars in 2016 and is predicted to reach US$253 billion by 2021 driven by global growth and increasing internet coverage and speeds
· First £5 million of net proceeds raised from the First Issue invested into Suir Valley Ventures Fund, a sub-fund of Suir Valley Funds ICAV which is supported by Enterprise Ireland (one of the largest VCs in Europe), and already has four investments in target areas
· Investee companies with first rate management teams, products which benefit from market validation, have been sold to customers, and generate revenue run rates equating to €500,000 over the next 12 months, will be targeted - bias towards UK, Ireland and other countries in the EEA
· Managed by SCAIFM, which has a highly experienced and successful management team with a proven track record of investing in the technology and small / micro company sectors
· Listed entity provides investors with diversified exposure to a space that is traditionally dominated by private venture capital funds
SURE director, Gareth Burchell, said, "Raising £3,309,999 is both a measure of the demand by investors for exposure to technologies that are set to change how we lead our everyday lives both at home and in the workplace, and also an endorsement of the Board and management team's ability to execute its strategy. The team has a proven record of value creation by investing in early stage technology companies. We are looking to replicate this success on the public markets with SURE, and in the process, offer investors the opportunity to gain early stage exposure to pioneering companies with winning technologies.
"The markets we are targeting in the technology sector are fast approaching what we believe are growth inflexion points. In the case of VR, as the number of headset units sold increases so too does demand for quality content and applications from a growing ecosystem of software, support and content providers. FinTech is already an established market but is set to grow further thanks to secular drivers such as financial regulation, cyber security and changing payment methods; while IoT, which enables devices to communicate with each other, is playing an ever-increasing role in both corporate and domestic life. Spotting tomorrow's technology winners early offers tremendous upside potential. With a Board and management team skilled in identifying and investing in companies with game-changing technologies and a defined investment process in place, SURE is ideally positioned to deliver."
ENDS
For further information, please visit www.sureventuresplc.com or contact:
|
Simon Hughes |
Sure Ventures plc |
+44 20 7186 9918 |
|
Isabel de Salis / Priit Piip |
St Brides Partners (Financial PR) |
+44 (0) 20 7236 1177 |
FURTHER DETAILS
The full Admission Document can be found on the Company's website www.sureventuresplc.com.
THE COMPANY
Introduction
The Company is a newly incorporated closed-ended investment company incorporated on 21 June 2017 in England and Wales and registered as an investment company under Section 833 of the Act. The Company intends to carry on business as an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Company has been incorporated with an unlimited life.
1 Investment objective
The investment objective of the Company is to achieve capital growth for investors.
2 Investment policy
Asset allocation
The investment policy of the Company is to seek exposure to early stage technology companies, with a focus on software-centric businesses in three chosen target markets:
* Augmented Reality and Virtual Reality (AR/VR)
* Financial Technology (FinTech)
* The Internet of Things (IoT)
The Company may invest directly in investee companies or obtain exposure to such companies through investment in collective investment vehicles, including the Fund and any Further Funds, which have investment policies that are complementary to that of the Company.
Investments may be made using such instruments as the Company in conjunction with SCAIFM may determine but are expected to predominantly comprise equities and equity-linked securities (including shares, preference shares, convertible debt instruments, payment-in-kind notes, debentures, warrants and other similar securities) and may include derivative instruments, contractual rights and other similar interests that grant the Company rights equivalent or similar to those conferred by equity and equity-linked securities.
The Company may implement its investment policy by investing in Class A Shares of the Fund and by investing in any Further Funds and collective investment vehicles managed by third parties. The Company will have discretion as to how to make investments, although it is anticipated that investments in the Fund will represent between 10 and 100 per cent. of the Company's portfolio at any given time, and that investments in any Further Funds and collective investment vehicles managed by third parties may similarly constitute a material proportion of the Company's Net Asset Value (subject to the investment restrictions set out below).
The Company will seek to hold a diversified portfolio of investments and, once the assets of the Company, the Fund and any other collective investment vehicles through which the Company invests are each fully invested, expects to have a direct or indirect holding of between 10 and 25 investments.
It is intended that the Company would ordinarily acquire a significant interest, consisting generally of between 20 and 50 per cent. of an investee company's equity capital. The Company does not envisage taking management control of a portfolio company other than in exceptional circumstances and on a temporary basis, and only if it is considered that such action would be necessary to secure the interests of the Company.
The Company's investments will not be constrained by geographical limits. However, it is expected that the Company's portfolio will predominantly be exposed to companies that have their principal operations in the UK, Ireland or elsewhere in the EEA.
Investment restrictions
No single investment of the Company will exceed 15 per cent. of Net Asset Value (calculated at the time of investment and including both committed but undrawn investments and follow-on investments). However, this restriction will not apply to investments in the Fund or any Further Funds or collective investment vehicles managed by third parties.
Investment by the Company in a Further Fund or collective investment vehicle managed by a third party may only be made if both:
(a) the value of the investment does not exceed 60 per cent. of Net Asset Value (calculated at the time of investment and including both committed but undrawn investments and follow-on investments); and
(b) such Further Fund or collective investment vehicle has an investment policy that is consistent with the investment policy of the Company.
There shall be no restriction on the proportion of the Company's assets that may be invested in the Fund from time to time.
In making investments in the Fund, Further Funds or collective investment vehicles managed by third parties, the Company will comply, on a look-through basis, with the investment restriction that no single investment of the Company will exceed 15 per cent. of Net Asset Value (calculated at the time of investment and including both committed but undrawn investments and follow-on investments).
Investments shall not be made in a portfolio company where such investment is to be used only for the purpose of re-financing the portfolio company's existing debts.
The Company shall not invest in companies whose primary business is acquisition or development of real estate (including but not limited to the construction of buildings for administration activities/ public administration) or petroleum, oil or gas exploration or other activities or prospection for other resources. The Company shall not make investments in real estate assets.
In relation to the utilisation of derivatives, including for investment and for hedging purposes, the Company shall not have an aggregate exposure of more than 15 per cent. of Net Asset Value (calculated at the time of investment) to any one counterparty.
Borrowing policy
The Company may deploy gearing of up to 20 per cent. of Net Asset Value (calculated at the time of borrowing) to seek to enhance returns and for the purpose of capital flexibility and efficient portfolio management. The Company's gearing is expected to primarily comprise bank borrowings but may include the use of derivative instruments and such other methods as the Board may determine.
The Board will review the Company's borrowing policy, in conjunction with SCAIFM, on a regular basis.
Hedging policy
The Company's investment in the Fund will be denominated in Euros. The Company may use derivatives, including forward foreign exchange contracts and contracts for difference, to seek to hedge against any currency risk between the currency of the Company's investment in the Fund and Sterling, the base currency of the Company. Shareholders should note that there is no guarantee that such hedging arrangements will be utilised or, if so, will be successful.
3 The Fund has undertaken that Commitments will first be invested in portfolio companies based in Ireland. This applies until the Fund's invested Commitments are equal to an amount that is expected to be up to €20 million. Accordingly, the Company is initially expected to have a material indirect exposure to companies based in Ireland.
Cash management
The Company may hold cash on deposit and may invest in cash equivalent investments, including short-term investments in money market type funds, tradeable debt securities and Government bonds and securities (''Cash and Cash Equivalents'').
There is no restriction on the amount of Cash and Cash Equivalents that the Company may hold and there may be times when it is appropriate for the Company to have a significant cash or cash equivalent position instead of being fully or near fully invested.
In order to efficiently allocate all of the Company's available funds, the Company may make short and medium-term investments in relatively liquid assets that are in accordance with the Company's investment policy (''Liquid Investments''). Such Liquid Investments may include shares, bonds and other debt instruments issued by companies as well as shares, units or other interests in collective investment schemes, other investment funds, exchange traded funds and fixed income investments.
Capital calls
The Company may invest in the Fund or other collective investment vehicles, subscriptions to which are made on a commitment basis. The Company will be expected to make a commitment that may be drawn down, or called, from time to time at the discretion of the manager of the Fund or other collective investment vehicle. The Company will usually be contractually obliged to make such capital call payments and a failure to do so would usually result in the Company being treated as a defaulting investor by the Fund or other collective investment vehicle.
The Company will seek to satisfy capital calls on its commitments through a combination of reserves, and where applicable the realisation, of Cash and Cash Equivalents and Liquid Investments, anticipated future cash flows to the Company, the use of borrowings and, potentially, the further issue of Shares.
Changes to the investment policy
No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution.
In the event of a breach of the investment policy set out above, or a breach of the investment policy of the Fund, SCAIFM shall inform the Board upon becoming aware of the same and if the Board considers the breach to be material, notification will be made to a Regulatory Information Service.
4 Dividend policy
The Directors intend to manage the Company's affairs to achieve Shareholder returns through capital growth rather than income. The Company does not expect to receive a material amount of dividends or other income from its direct or indirect investments. It should not be expected that the Company will pay a significant annual dividend, if any.
Regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011 provides that, subject to certain exceptions, an investment trust may not retain more than 15 per cent. of its income in respect of each accounting period. Accordingly, the Company may declare an annual dividend from time to time for the purpose of seeking to maintain its status as an investment trust.
5 Potential returns of capital
Due to the start-up and early-stage nature of many of the Company's expected direct and indirect investments, the returns to the Company following a successful exit of an investment may be material. It is expected that exit proceeds will usually be redeployed into other investments in line with the Company's investment policy should such investment opportunities be available. However, in circumstances where the Board determine that the Company would hold surplus cash reserves or where the Board otherwise determines that it is desirable to do so, the proceeds of disposals of investments, or returns of capital to the Company from the Fund or any Further Fund, may be returned to Shareholders.
The Board intends to consider, in conjunction with the Company's advisers, the available options for effecting any return of capital to Shareholders. Such options may include the Company making one or more tender offers to purchase Shares, the introduction of a Share redemption mechanism, paying one or more special dividends, or any alternative method or a combination of methods.
Certain methods intended to effect a return of capital may be subject to, amongst other things, Shareholder approval.
6 Share rating management
The Board considers that it would be undesirable for the market price of the Ordinary Shares to diverge significantly from their Net Asset Value. Therefore the Board will have the discretion to seek to manage, on an ongoing basis, the premium or discount at which the Ordinary Shares may trade to their Net Asset Value through further issues and buy-backs, as appropriate.
Premium management
Once the proceeds of the First Issue have been fully invested, the Company intends to implement the Placing Programme. The Directors have authority to issue up to 50 million Ordinary Shares and/or C Shares immediately following First Admission until the first annual general meeting of the Company. Shareholders' pre-emption rights over this unissued share capital have been disapplied so that the Directors will not be obliged to offer any new Ordinary Shares and/or C Shares to Shareholders on a pro rata basis. No Ordinary Shares will be issued at a price less than the Net Asset Value (cum income) per Ordinary Share at the time of their issue. As such, the Placing Programme should enhance NAV per Share for existing Shareholders. The costs and expenses of any issue of C Shares under the Placing Programme will be paid out of the gross proceeds of such issue and will be borne by holders of C Shares only.
Further details of the Placing Programme are set out in Part 6 of the Admission document.
Investors should note that the issuance of new Ordinary Shares and/or C Shares is entirely at the discretion of the Board, and no expectation or reliance should be placed on such discretion being exercised on any one or more occasions.
Treasury shares
The Act allows companies to hold shares acquired by way of market purchase as treasury shares, rather than having to cancel them. This would give the Company the ability to re-issue Ordinary Shares quickly and cost effectively, thereby improving liquidity and providing the Company with additional flexibility in the management of its capital base. No Ordinary Shares will be sold from treasury at a price less than the Net Asset Value (cum income) per Ordinary Share at the time of their sale unless they are first offered pro rata to existing Shareholders.
Discount management
The Directors recognise the importance to investors of the Shares not trading at a significant discount to their prevailing Net Asset Value. To the extent that the Shares trade at a significant discount to their prevailing Net Asset Value, the Board will consider whether (in the light of the prevailing circumstances) the Company should purchase its own Shares (whether pursuant to the general authority referred to below or pursuant to tender offers made on appropriate terms). There is, however, no guarantee or assurance that any discount control mechanisms proposed by the Board will reduce any discount.
The Directors have the authority to make market purchases of up to 14.99 per cent. of the Ordinary Shares in issue on First Admission. The maximum price (exclusive of expenses) which may be paid for an Ordinary Share must not be more than the higher of: (i) 5 per cent. above the average of the mid-market values of the Ordinary Shares for the five Business Days before the purchase is made; or (ii) the higher of the price of the last independent trade and the highest current independent bid as stipulated by Regulatory Technical Standards adopted by the European Commission pursuant to Article 5(6) of MAR. Ordinary Shares will be repurchased only at prices below the prevailing NAV per Ordinary Share, which should have the effect of increasing the NAV per Ordinary Share for remaining Shareholders.
It is intended that a renewal of the authority to make market purchases will be sought from Shareholders at each annual general meeting of the Company. Purchases of Ordinary Shares will be made within guidelines to be established from time to time by the Board. Any purchase of Ordinary Shares would be made only out of the available cash resources of the Company. Ordinary Shares purchased by the Company may be held in treasury or cancelled.
Purchases of Ordinary Shares may be made only in accordance with the Act, the Disclosure Guidance and Transparency Rules and MAR.
Investors should note that the repurchase of Ordinary Shares is entirely at the discretion of the Board and no expectation or reliance should be placed on such discretion being exercised on any one or more occasions or as to the proportion of Ordinary Shares that may be repurchased.
7 C Shares
If there is sufficient demand from potential investors at any time following First Admission, the Company may seek to raise further funds through the issue of C Shares under the Placing Programme, further details of which are set out in Part 6 of this document. The issue of C Shares is designed to overcome the potential disadvantages for both existing and new investors, which could arise out of a conventional fixed price issue of further Ordinary Shares for cash. In particular:
* the C Shares would not convert into Ordinary Shares until at least 90 per cent. of the net proceeds of the C Share issue (or such other percentage as the Directors and AIFM may agree) have been invested in accordance with the Company's investment policy (or, if earlier, six months after the date of their issue);
* the assets representing the net proceeds of a C Share issue would be accounted for and managed as a distinct pool of assets until their conversion date. By accounting for the net proceeds of a C Share issue separately, Shareholders will not participate in a portfolio containing a substantial amount of uninvested cash before the conversion date;
* the basis on which the C Shares would convert into Ordinary Shares is such that the number of Ordinary Shares to which holders of C Shares would become entitled will reflect the relative net asset values per share of the assets attributable to the C Shares and the Ordinary Shares. As a result, the Net Asset Value per Ordinary Share can be expected to be unchanged by the issue and conversion of any C Shares; and
* the Net Asset Value of the Ordinary Shares would not be diluted by the expenses of the C Share issue, which would be borne by the C Share pool.
The Articles contain the C Share rights, full details of which are set out in paragraph 5.18 of Part 10 of the Admission document.
The Directors have authority to issue up to 50 million C Shares (less any Ordinary Shares issued under the Placing Programme) until the first annual general meeting of the Company.
8 Profile of typical investor
An investment in the Company is designed to be suitable for institutional investors and professionally-advised private investors seeking exposure to early-stage technology companies, and financially sophisticated, non-advised private investors who are capable of evaluating the risks and merits of such an investment and who have sufficient resources to bear any loss which may result from such an investment.
9 Net Asset Value
The unaudited Net Asset Value per Ordinary Share and unaudited Net Asset Value per C Share (if any are in issue) will be calculated in Sterling by the Administrator as at the last Business Day of each calendar quarter. Such calculations will be published on a quarterly basis through a Regulatory Information Service and will be available through the Company's website.
The Net Asset Value will be the value of all assets of the Company less its liabilities to creditors (including provisions for such liabilities) determined in accordance with the Association of Investment Companies' valuation guidelines and in accordance with applicable accounting standards.
The Company's direct and indirect investments in unquoted securities will be valued in accordance with the valuation guidelines issued by the British Private Equity & Venture Capital Association (''BVCA''). These guidelines are based around the accounting concepts of fair value. Such valuations may be conducted on an infrequent basis, under the direction of SCAIFM according to the techniques prescribed in the guidelines and summarised by the headings below:
* Market approach
* Price of recent investment
* Multiples
* Industry valuation benchmarks
* Available market prices
* Income approach
* Discounted cash flows
* Replacement cost approach
* Net assets
If the Directors consider that any of the above bases of valuation are inappropriate in any particular case, or generally, they may adopt such other valuation procedures as they consider reasonable in the circumstances.
At least annually, the valuation of each of the Company's investments will be undertaken by an independent valuer and will be subject to audit by the Auditors. It is the expectation of the Board that the valuation techniques used throughout the interim periods shall be performed on a consistent basis, unless the Board determine that an alternative method should be adopted.
There can be no guarantee that the basis of calculation of the value of the Company's investments used in the valuation process will reflect the actual value achievable on realisation of those investments. This may lead to volatility in the valuation of the unquoted proportion of the Company's portfolio and, as a result, volatility in the price of Ordinary Shares. Furthermore, SCAIFM is entitled to receive a performance fee for its services to the Company which is based, in part, on the value of the Company's investments. This creates a potential conflict of interest as SCAIFM will have involvement in the valuation of the Company's investments.
The Fund will, and any Further Funds may, report financial and net asset value information to the Company in Euros. The Company will convert such amounts into Sterling for the purposes of the Company's financial and Net Asset Value reporting at such exchange rate or rates as the Board and/or SCAIFM may determine.
The Directors may temporarily suspend the calculation, and publication, of the Net Asset Value during a period when, in the opinion of the Directors:
(i) there are political, economic, military or monetary events or any circumstances outside the control, responsibility or power of the Board, and disposal or valuation of investments of the Company or other transactions in the ordinary course of the Company's business is not reasonably practicable without this being materially detrimental to the interests of Shareholders or if, in the opinion of the Board, the Net Asset Value cannot be fairly calculated;
(ii) there is a breakdown of the means of communication normally employed in determining the calculation of the Net Asset Value; or
(iii) it is not reasonably practicable to determine the Net Asset Value on an accurate and timely basis.
Any suspension in the calculation of the Net Asset Value will be notified through a Regulatory Information Service as soon as practicable after any such suspension occurs.
10 Meetings, reports and accounts
The Company will hold a meeting as its annual general meeting in each year. The annual report and accounts of the Company will be made up to 31 March in each year with copies expected to be sent to Shareholders within the following four months. The first annual report will be prepared to 31 March 2018. The Company will also publish unaudited half-yearly reports to 30 September with copies expected to be sent to Shareholders within the following three months.
The Company's financial statements will be prepared in accordance with IFRS.
11 The Takeover Code
The Takeover Code applies to the Company.
Given the existence of the buyback powers described in the paragraphs above, there are certain considerations that Shareholders should be aware of with regard to the Takeover Code.
Under Rule 9 of the Takeover Code, any person who acquires shares which, taken together with shares already held by him or shares held or acquired by persons acting in concert with him, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.
Similarly, when any person or persons acting in concert already hold more than 30 per cent. but not more than 50 per cent. of the voting rights of such company, a general offer will normally be required if any further shares increasing that person's percentage of voting rights are acquired.
Under Rule 37 of the Takeover Code when a company purchases its own voting shares, a resulting increase in the percentage of voting rights carried by the shareholdings of any person or group of persons acting in concert will be treated as an acquisition for the purposes of Rule 9 of the Takeover Code. A shareholder who is neither a director nor acting in concert with a Director will not normally incur an obligation to make an offer under Rule 9 of the Takeover Code in these circumstances.
However, under note 2 to Rule 37 of the Takeover Code where a shareholder has acquired shares at a time when he had reason to believe that a purchase by the company of its own voting shares would take place, then an obligation to make a mandatory bid under Rule 9 of the Takeover Code may arise.
The buyback powers could have implications under Rule 9 of the Takeover Code for Shareholders with significant shareholdings. The buyback powers should enable the Company to anticipate the possibility of such a situation arising. Prior to the Board implementing any share buyback the Board will seek to identify any Shareholders who they are aware may be deemed to be acting in concert under note 1 of Rule 37 of the Takeover Code and will seek an appropriate waiver in accordance with note 2 of Rule 37. However, neither the Company, nor any of the Directors, nor SCAIFM will incur any liability to any Shareholder(s) if they fail to identify the possibility of a mandatory offer arising or, if having identified such a possibility, they fail to notify the relevant Shareholder(s) or if the relevant Shareholder(s) fail(s) to take appropriate action.
12 Taxation
Potential investors are referred to Part 9 of this document which contains a general summary of certain UK tax considerations relating to the acquisition, holding and disposal of Shares. This summary, which is based on current UK law and the current published practice of HMRC, does not constitute tax advice. Investors who are in any doubt as to their tax position or who are subject to tax in jurisdictions other than the UK are strongly advised to consult their own professional advisers.
13 Risk factors
The Company's business is dependent on many factors and potential investors should read the whole of this document and in particular the section entitled ''Risk Factors'' on pages 25 to 34 of the Admissions document.
THE INVESTMENT OPPORTUNITY
1 Introduction
The Company has been established to offer investors an opportunity to achieve diversified exposure to early stage technology companies, with a focus on software-centric businesses in three chosen target markets:
* Augmented Reality and Virtual Reality (AR/VR)
* Financial Technology (FinTech)
* The Internet of Things (IoT)
Investors will have the chance to leverage the industry relevant skill sets, knowledge and expertise of SCAIFM, the investment committee of the Fund and the Company's Board of Directors.
The Company will invest the first £5 million of net proceeds raised from the First Issue into the regulated ICAV fund structure of the Fund, which is currently investing in AR and seeks to create a diversified exposure to the target markets identified above. The Company will invest funds raised in excess of £5 million in additional target companies or increase its position in companies where the Fund already has investments. It will do so by either investing directly in individual companies or by making commitments to fund structures with similar investment policies to the Fund and the Company or investments through high potential start-up accelerators in the same market areas.
The investment objective and policy of the Company is set out in full in paragraphs 2 and 3 of Part 1 of the Admission document.
2 Investment rationale
AR/VR
The AR/VR market is evolving at a rapid pace. The market is expected to grow into a US$108 billion industry within the next five years. Significant investment into hardware capability and headset development has been made by major industry players such as Facebook, Oculus Rift, HTC, Samsung, Microsoft and others. This investment has ignited a new and exciting industry within the technology sector. Hardware manufacturers and AR/VR users are now searching for software capabilities/support and content, and we believe that exposure to this industry via the Fund and direct investment into software companies in the space will offer significant upside potential for investors. Through SCAIFM's network of technology accelerators, angel investor partners and industry contacts in the AR/VR space, the Company is expected to have a strong chance of discovering the industry leaders of tomorrow.
FinTech
FinTech as an industry segment that has grown significantly and continues to do so at a rapid pace. It has a transaction value that is estimated to be US$2.6 trillion US dollars. The market is predicted to expand to a size of US$6.9 trillion in the next 5 years, which represents a transaction value at a CAGR of 21.8 per cent. The Banking, Finance and Insurance industries are increasingly accepting and embracing the efficiencies and benefits of technology. Ever changing financial regulation, cyber security requirements and payment trends are driven by technological advancement. SCAIFM's investment committee and its network continues to see new and exciting deal flow in this area and believe that this market segment will continue to develop at pace. The Directors believe that investors looking for exposure to the emerging software technology market must include a FinTech element in its investment strategy.
Internet of Things
The Internet of Things (IoT) as a segment of the market is a broad investment area, but is defined as the interconnection via the internet of computing devices embedded in everyday objects enabling them to send and receive data. The market is estimated to be worth US$140 billion dollars in 2017 and is predicted to reach a size of US$322 billion by 20227. The global growth and advancement of internet coverage, the increased speed and capability of connectivity and the mass market penetration of smartphones/tablet sales has opened up significant opportunities for software companies. Businesses from many industries are embracing the efficiencies, cost savings and the ''direct to consumer'' penetration this technological advancement has offered. The Directors see the potential for continued growth in this area and believe that investor returns will benefit from exposure to the space.
3 Investment strategy
Both the Fund and the Company will look to invest in companies at the ''seed investment'' stage with a key focus on assisting them to reach the ''series A'' funding stage and would intend to ''follow on'' with its investment at that time.
SCAIFM defines the series A stage as being a venture capital-led fundraise of around €5 million -
€15 million, with the investee company typically having achieved annual revenues of €3 million. SCAIFM defines the seed stage as having the following characteristics and investment features.
Investee company characteristics
SCAIFM's strategy is to seek companies with the following characteristics:
* The company already has a core management team.
* The company has a product.
* The company has some initial market validation of the product.
* The company has sold the product to numerous customers in its local market.
* Ideally the company's revenue has a run rate that equates to €500,000 over the next 12 months.
Investment plan
SCAIFM's investment plan in respect of the Company's portfolio is expected to comprise the following core elements:
* Seeking to invest between €250,000 and €500,000 in an initial tranche in an investee company, extending to up to €1 million subject to the achievement of milestones.
* Co-investment with syndicated partners (such as founders, friends, angels and other venture capital investors) matching the Company's investment amount.
* Seeking to capitalise companies over multiple tranches up to €4-5 million prior to a series A round.
* Aiming for companies to achieve revenues of more than €3 million before assisting the company with a series A round or a possible junior market flotation.
4 Conclusion
The Board of Directors of the Company believes that an investment in a listed entity that provides investors with diversified exposure to a space that is traditionally dominated by private venture capital funds should offer investors an exciting opportunity with significant growth potential.
FUND
1 Introduction to the Fund
The Fund is a sub-fund of the ICAV and was established on 8 December 2016. The ICAV is an Irish Collective Asset Management Vehicle registered in Ireland on 18 October 2016 with registered number C162245 and with segregated liability between sub-funds. The ICAV is authorised by the Central Bank of Ireland pursuant to the Irish Collective Asset-management Vehicles Act 2015. The Fund commenced operations on 1 March 2017.
An investor in the Fund (including the Company) agrees at the time of investment to subscribe for a maximum number of Class A Shares in the Fund. The Fund requires payment for new shares on account of that commitment on a drawdown basis. The Class A Shares of the Fund are not admitted to trading on any stock exchange. The Fund is a closed-ended vehicle and Fund Shareholders (including the Company) are not entitled to request the Fund to redeem or repurchase their shares in the Fund.
The Fund has a fixed term of 10 years, which is due to expire in 2027. The Fund is managed by SCAIFM, the manager of the Company.
2 The Fund's investment objective and policy
Investment objective
The Fund's objective is to seek to achieve high rates of capital growth on investments consistent with professional risk management by seeking investment and acquisition opportunities in SMEs by participation in the financing of the acquisition of enterprises by/with their managers and/or by/with third parties, and enterprises with significant expansion or development opportunities, requiring injections of capital and skills.
Investment policy
Industry Focus. The Fund intends to invest in a broad range of software companies but will have a focus on companies in the Augmented Reality and Virtual Reality (AR/VR), Financial Technology (FinTech) and the Internet of Things (IoT) sectors. For the avoidance of doubt, the Fund investment criteria will not exclude any Enterprise Ireland client in the software sector. In addition, whilst the Fund is a software focused Fund, it may at its discretion invest in software companies that have a hardware component in the IoT sector.
Investments. The Fund intends to invest in equities and equity-linked securities (including shares, preference shares, convertible debentures, warrants and other similar securities) and/or through the acquisition of instruments, contractual rights and other similar interests that grant the Fund rights equivalent to those conferred by equity and equity linked securities, in each case which give the Fund a voting interest in each Portfolio Company.
Significant Equity Interests. Although the Fund may acquire up to 50 per cent. of the equity securities or otherwise controlling interests of a Portfolio Company, it intends ordinarily to acquire a significant interest, consisting generally of between 20 and 50 per cent. of such company's equity capital. The ICAV does not envisage taking management control of a Portfolio Company other than in exceptional circumstances and on a temporary basis, and only if SCAIFM considers that such action would be necessary to secure the interests of the Fund.
Investment Amount. The Fund intends to make an investment of at least €100,000 in each Portfolio Company and expects to invest in between 20 to 30 Portfolio Companies in total. Such investment may be spread over time and may be for a lesser amount at the discretion of SCAIFM.
The ICAV may not grant loans or act as guarantor on behalf of third parties. Notwithstanding the preceding sentence, the Fund may, (i) invest in an issuer where the investment is structured as part equity/part loan investment, or (ii) invest by way of loan in an issuer, provided such loan investment is made in connection with one or more equity type investments that have been made in the issuer. Investment by way of loan may arise, for example, where the tax regime may favour structuring an investment partially with loans or where a loan is required to match debt provided by other Investors.
Identify exit alternatives at the outset. SCAIFM will seek to identify and progress towards exit opportunities from the time of the Fund's first investment in a Portfolio Company. In particular, SCAIFM will seek to ensure that one or more of the following exit strategies are available to the Fund at the time of its planned divestment: (a) the Portfolio Company will be an attractive target for other industrial groups seeking vertical or horizontal integration, (b) the Portfolio Company will acquire another company or business leading to the creation of a more profitable company and/or greater liquidity (e.g. through a merger with a listed company), (c) a group of shareholders will have an interest in purchasing the Fund's investment (d) the Portfolio Company can repurchase or redeem the Fund's investment through appropriate returns generated from the Portfolio Company's own cash flows and/or (e) a public offering of the Portfolio Company's shares on a public market. It will be the strategy of the Fund, where appropriate, to list companies on the UK junior public markets at an early stage to help the company obtain access to significant capital to help grow and scale the company.
Corporate Governance. The Fund intends to invest in companies that SCAIFM believes have and are expected to maintain good standards of corporate governance. SCAIFM will conduct due diligence on the standards of corporate governance and ethics practised by companies in which it proposes to invest the Fund, and will seek to require that Portfolio Companies maintain corporate and ethical standards which are, in the opinion of SCAIFM consistent with generally accepted western standards applicable to human rights, environmental management and financial ethics. SCAIFM shall be entitled to sell the Fund's interests in any Portfolio Company that, in its opinion, does not maintain standards of corporate governance and ethics acceptable to it.
Investment restrictions
Unless waived by a special resolution of the Fund Shareholders, the Fund's investments will be subject to the following investment restrictions:
* No single investment in a Portfolio Company will exceed 15 per cent. of aggregate Commitments.
* The Fund will not invest directly in listed companies. Notwithstanding the fact that the Fund will not invest directly in listed companies, Portfolio Companies may seek an initial public offering in accordance with the Fund's investment policies, in which case: (i) the Fund may continue to hold such investments without restriction; and (ii) the Fund may make follow-on investments in such Portfolio Companies.
* The Fund may not borrow more than the lower of 15 per cent. of aggregate Commitments or undrawn commitments.
* Investments shall not be made in a Portfolio Company where such investment is to be used only for the purpose of re-financing the Portfolio Company's existing debts.
* The Fund shall not invest in hostile transactions (as such term is commonly used in the private equity industry) involving publicly traded companies.
* An amount (a) equal to 100 per cent. of the total amount invested by the Fund over the life of the Fund will be invested in Portfolio Companies that are SMEs immediately prior to their investment and (b) not less than 75 per cent. of the total amount invested by the Fund in Portfolio Companies over the life of the Fund will be invested in SMEs which are based in the territory of the Member States of the European Union.
* The Fund shall not make any investment in an undertaking in difficulties as defined in the Guideline on State Aids for Rescuing and Restructuring Firms in Difficulties (Official Journal C244 (01.10.2004)), as extended by the provisions of the Communication of the Commission in Official Journal 2.10.2012 (2012/C 296/02), as from time to time amended, extended or replaced and in effect).
* The Fund shall not make any new investment in any country which at the time of such investment is a participant in an international boycott that is illegal under Irish law.
* The Fund shall not invest in companies that are engaged in businesses that are illegal under applicable European Union laws and regulations.
* The Fund shall not invest in or guarantee or otherwise provide financial or other support to, directly or indirectly, companies or other entities who are engaged in, or directly or indirectly control other entities whose primary purpose is, any one of the following:
* an illegal economic activity (i.e. any production, trade or other activity, which is illegal under the laws or regulations applicable to the ICAV or the relevant Portfolio Company or entity);
* the production of and trade in tobacco and distilled alcoholic beverages and related products;
* the production or trade in weapons and ammunition;
* the manufacture of ''prohibited munitions'' (including ''cluster munitions, explosive bomblets'' and ''anti-personnel mines'' as each such term is defined in the Irish Cluster Munitions Anti-Personnel Mines Act 2008) or components to be used therein;
* pornography or the pornographic adult entertainment industry;
* casinos and equivalent enterprises or the gambling industry generally;
* the research, development or technical applications relating to electronic data programs or solutions, which aim specifically at:
• supporting any activity referred to under the foregoing items;
• internet gambling and online casinos; or
• pornography, or
• are intended to enable to illegally (a) enter into electronic data networks or (b) download electronic data.
* Any investments in Portfolio Companies operating in the field covered by Regulation (EEC) No. 951/97 on the improvement of the processing and marketing of agricultural produce (as from time to time amended and in effect) must satisfy the selection criteria set out in Decision No. 94/174EEC (as from time to time amended and in effect).
* The Fund shall not invest in companies whose primary business is acquisition or development of real estate (including but not limited to the construction of buildings for administration activities/public administration) or petroleum, oil or gas exploration or other activities or prospection for other resources.
The Fund shall not make investments in real estate assets.
Borrowing policy and hedging
The Fund will not, at the Fund level and without a special resolution of Fund Shareholders:
(a) obtain credit, whether secured or unsecured, other than where such credit is of a maximum term of three months to facilitate the making of investments pending receipt of the proceeds of a drawdown of Commitments from Fund Shareholders; or (b) hedge its investments other than pending the making or disposal of investments in the Fund's portfolio to protect against movements in interest rates, currencies or commodity prices (any such hedging being limited to transactions that do not result in the Fund's net exposure materially leveraging the Fund when both hedges and investments are taken into account).
Although leverage is not central to the investment strategy of the Fund, and SCAIFM will recommend that Portfolio Companies adopt appropriately conservative capital structures, Portfolio Companies may leverage their assets and hedge their exposure to commodities and other cycles without restriction and as they deem appropriate.
3 The ICAV Directors
The ICAV Directors are responsible for the overall management and control of the Fund. However, the ICAV Directors are not responsible for the day-to-day operations and administration of the Fund, nor are they responsible for making or approving any investment decisions, as they have delegated such responsibilities to SCAIFM and the day-to-day administrative functions to the Fund Administrator.
The ICAV Directors are as follows:
Barry Downes
Barry is the Founder of FeedHenry Ltd., which was sold to RedHat Inc. in October 2014 for US$82 million. Barry was also the CEO of the TSSG (www.tssg.org) prior to joining the ICAV and he now remains a member of the Board of the TSSG. As the CEO, Barry was at the centre of the development of research and innovation led eco-system of software companies. Barry has been responsible for growing the TSSG from a 10-person group to 140 person research institute which works with international companies such as Google, IBM, Cisco and EMC and other leading research institutes in the UK and Ireland, Europe and the USA. During his time with TSSG, Barry and his team have raised over €80 million in R&D funding from industry and public research bodies. Barry and his team have also been fundamental to the creation of a cluster of high-tech software start-ups and in addition have delivered innovative technologies and solutions to over 110 companies based in the UK and Ireland, Europe and Silicon Valley over the past three years.
In addition, Barry and his team have previously researched and developed new technologies that are related to the Fund's key focus areas. Previously, Barry held senior management positions in product development in the USA, professional services in Europe and most recently in research in Europe. Barry is a Certified Investment Fund Director with the Institute of Banking. He has an MBA from Smurfit School of Business, University College Dublin (UCD) and a BSc. in Applied Computing from the Waterford Institute of Technology (WIT). Barry also has executive education qualifications from Henley Business School in the UK and Harvard Law School in Cambridge, MA in the USA.
Tom Coghlan
Tom is a Certified Investment Fund Director with the Institute of Banking and has in-depth knowledge of the investment fund sector along with governance, oversight and control expertise. Tom is Central Bank authorised and approved and is a Cayman Islands Monetary Authority registered director.
A Fellow of the Institute of Chartered Accountants in Ireland, Tom qualified from PricewaterhouseCoopers. He was a Director of Citi Global Markets and Head of Pan European Equity Sales in Ireland from 2004 to 2013 with responsibility for a diverse client base, including 'long only' institutions, hedge funds, thematic funds and structured product providers. From 2000 to 2004 he was a senior Portfolio Manager in the wealth management division on NCB Stockbrokers. Tom holds a Bachelor of Arts from UCD in Pure Economics and became a registered stockbroker of the Irish Stock Exchange in 2000.
Toby Raincock
Toby started his career at KPMG, Qualifying as an ACA in 2001. He then joined Evolution Securities Limited as Financial Controller at the beginning of a period of sustained growth. Having worked with or led a number of initiatives aimed at expanding the platform for future growth or improving efficiency/cost reduction, Toby took over as COO in early 2010. Following Investec's acquisition of Evolution in December 2011, Toby moved to Barclays as Head of CASS within Operations Regulatory Control function. The role covered all matters pertaining to Client Money and Assets, on both the Investment Banking and Wealth and Investment Management sides of the business, during a period of heightened regulatory scrutiny.
Toby joined Shard Capital in April 2013 as Group Chief Financial Officer and became Chief Executive Officer in December 2016. Toby is responsible for delivering the financial strategy of the Group and is a Partner of Shard Capital and a Partner of SCAIFM.
Brian Kinane (alternate director to Toby Raincock)
Brian has 23 years' experience in technology and finance, including 15 years in the technology and telecoms industries and eight years' experience in growth and venture capital principal investment and finance. Brian has extensive experience of international corporate venturing and product management at leading global companies such as Ericsson Group and Telenor Group in the broadband and mobile industry sectors. In addition, Brian held a number of executive board-level positions at high growth technology start-ups including the position of board director and seed shareholder of FeedHenry which was acquired by RedHat, Inc. for €63 million in 2014. During the last eight years, Brian has held senior positions at a UK investment manager regulated by the FCA, which advised on the deployment of debt and equity capital to both private and public venture and growth stage companies. Brian holds a first-class degree in Computer Science from Trinity College Dublin, MBAs from Columbia and London Business Schools and is a patent holder.
4 The Fund's AIFM
The Fund has appointed SCAIFM as its manager to provide investment management services and to act as the Fund's alternative investment fund manager for the purposes of the AIFMD. SCAIFM is also the manager of the Company. Further information on SCAIFM is set out in paragraph 2 of Part 4 of the Admission document.
5 Investment portfolio
As at the Latest Practicable Date, the unaudited net asset value of the Fund was approximately €1.25 million and the unaudited net asset value per Class A Share was €0.8037. As at the date of the Admission document, the Fund has raised aggregate Commitments (including undrawn Commitments) of €10.8 million.
As at the date of the Admission document, the Fund's portfolio comprised three investments, being:
(i) a holding of ordinary shares and loan notes issued by Immersive VR Education Limited and valued at €300,000. The portfolio company is building a virtual social learning platform and developing showcase VR experiences;
(ii) a holding of preference shares issued by Wia Technologies Limited and valued at €250,000. The portfolio company is a Dublin-based start-up building an Internet of Things cloud platform; and
(iii) a holding of preference shares issued by War Ducks Limited and valued at €300,000. The portfolio company is a developer of virtual reality games and experiences.
The information set out in this paragraph 5 is unaudited and has been extracted from the management accounts of the Fund.
6 Financial information
The Fund commenced operations on 1 March 2017. Audited financial statements of the ICAV for the period from commencement of operations to 30 June 2017, which have been audited by PKF Littlejohn LLP and are required to be included in this document, are reproduced in Appendix 1 to this document. The Fund is currently, and was at the date of the financial statements, the sole sub-fund of the ICAV. The ICAV has issued two subscriber shares of nominal value €1 each which are not attributable to the Fund. As at the date of this document, all other assets and liabilities of the ICAV are attributable to the Fund. Accordingly, the financial statements of the ICAV show the financial condition of the Fund in a manner that is identical in all material respects to financial statements of the Fund prepared in respect of the same period. PKF Littlejohn LLP, have given an unqualified opinion that these financial statements give a true and fair view of the state of affairs of the Fund and of its loss, cash flows and changes in equity for the period from commencement of operations to 30 June 2017 and have been properly prepared in accordance with IFRS. PKF Littlejohn LLP is a firm of chartered accountants and is an auditor registered to carry on audit work by the Institute of Chartered Accountants in England and Wales (ICAEW).
The key figures that summarise the Fund's financial condition in respect of the period from commencement of operations to 30 June 2017, which have been extracted without material adjustment from the audited financial statements of the ICAV for that period, are set out in the following table:
|
As at or for the period ended 30 June |
|
|
|
2017 |
|
|
(audited) |
|
Net assets (€'000) |
188 |
|
Net asset value per Class A Share (e) |
0.44 |
|
Revenue |
|
|
Total income (€'000) |
0 |
|
Net profit / (loss) (€'000) |
(259) |
|
Earnings per Class A Share (e) |
(0.56) |
|
Dividend per Class A Share (e) |
0 |
|
Total |
|
|
Total return/(loss) before finance costs and taxation (€'000) |
(259) |
|
Net profit/(loss) (€'000) |
(259) |
|
Earnings per Class A Share (e) |
(0.56) |
Since its incorporation, the Fund has raised aggregate Commitments of €10.8 million and drawn down Commitments of €1,551,958.84, and has made three investments.
7 Dividend policy
The ICAV Directors manage the Fund's affairs to achieve investor returns through capital growth rather than income. The Fund does not expect to receive a material amount of dividends or other income from its direct or indirect investments. It should not be expected that the Fund will pay a significant annual dividend, if any.
8 The Fund Administrator and Depositary
The Fund has appointed the Fund Administrator to act as its administrator pursuant to the Fund Administration Agreement entered into between, amongst others, the Fund and the Fund Administrator. The Fund Administrator is responsible for providing fund administration and secretarial services required in connection with the Fund, such as calculating the net asset value of the Fund. The Fund Administrator has appointed Citco Fund Services (Europe) B.V. as sub- administrator to the Fund, to whom it has delegated certain administrative duties in relation to the Fund.
The Fund has appointed the Depositary to act as its depositary pursuant to the Fund Depositary Agreement entered into between the Fund and the Depositary. The Fund Depositary provides depositary services to the Fund and certain additional services pursuant to the AIFMD.
9 Fund net asset value calculations
The Fund Administrator calculates the net asset value of the Fund and net asset value per share of the Fund on a quarterly basis. The ICAV forwards the result of the Fund Administrator's calculation to Fund Shareholders no later than 15 working days after the end of the period to which they relate. The net asset value per share of the Fund, when calculated, is also available at the office of the Fund Administrator.
The ICAV Directors, may, with the consent of the Fund Depositary and SCAIFM, temporarily suspend the calculation of the net asset value and net asset value per share of the Fund (and consequently suspend the return of investment proceeds to Fund Shareholders) during:
* any period when any market on which a substantial part of the investments of the Fund are quoted, listed or dealt in is closed otherwise than for ordinary holidays;
* any period when dealings on any such market are restricted or suspended;
* the existence of any state of affairs as a result of which disposal of the assets of the Fund cannot, in the opinion of the ICAV Directors or SCAIFM, be effected normally or without seriously prejudicing the interests of Fund Shareholders;
* any breakdown in the means of communication normally employed in determining the value of net assets of the Fund or when, for any other reason, the value of any assets of the Fund cannot be promptly and accurately ascertained;
* any period during which the Fund Depositary is unable to repatriate funds required for making payments due on redemption of shares of the Fund;
* any period during which the realisation of assets or the transfer of funds involved in such realisation cannot, in the opinion of the ICAV Directors or SCAIFM, be effected at normal prices or normal rates of exchange; or
* any period when a substantial part of the assets of the Fund cannot be valued in accordance with the valuation method of the relevant assets as set out in the Fund's instrument of incorporation.
10 Corporate governance
The ICAV has adopted the Corporate Governance Code for Collective Investment Schemes and Management Companies issued by the Irish Funds Industry Association, and complies with the provisions of that Code.
11 Typical investor
Only persons who are ''qualifying investors'' within the meaning of the Irish AIF Rulebook may invest in the Fund. The Company may invest in the Fund.
12 Material relationships and conflicts of interest
SCAIFM, the manager of the Fund and the Company, and its respective officers and employees may from time to time act for other clients or manage other funds, which may have similar investment objectives and policies to that of the Fund and the Company. Circumstances may arise where investment opportunities will be available to the Fund and/or the Company which are also suitable for one or more of such clients of SCAIFM or such other funds.
Furthermore, SCAIFM is entitled to receive a performance interest in respect of its services to the Fund which is based, in part, on the value of the Fund's investments. This creates a potential conflict of interest as SCAIFM has involvement in the valuation of the Fund's investments.
The ICAV Directors have satisfied themselves that SCAIFM has procedures in place to address potential conflicts of interest and that, where a conflict arises, SCAIFM will seek to resolve that conflict in accordance with the Fund AIFM Agreement and applicable law and regulation. In particular, the ICAV Directors have satisfied themselves that where a conflict arises in respect of the allocation of an investment opportunity, SCAIFM will allocate the opportunity on a fair basis and in accordance with such provisions and rules.
Conflicts of interest may also arise between some of all of the ICAV Directors, the Company and the Fund. However, as at the date of this document, except as stated below, there are no material relationships between the ICAV Directors and these parties, nor any potential or actual conflicts of interest between any duties owed to the Fund by the ICAV Directors and their private interests or other duties.
Toby Raincock is an ICAV Director and is also a senior officer of SCAIFM. It is expected that he will soon be appointed as a director of War Ducks Limited, which is a portfolio company of the Fund and to which the Fund may, if it is so determined, make follow-on investments.
Barry Downes is an ICAV Director and is also a partner of SCAIFM. He is also a director of Immersive VR Education Limited, which is a portfolio company of the Fund and to which the Fund may, if it is so determined, make follow-on investments.
Brian Kinane is an alternate director to Toby Raincock in respect of the Fund and is also a partner of SCAIFM. He is also a director of Wia Technologies Limited, which is a portfolio company of the Fund and to which the Fund may, if it is so determined, make follow-on investments.
Certain principals of Shard Capital and/or SCAIFM are also shareholders of the Fund.
13 Meetings, accounts and reports to Fund Shareholders
The annual general meeting of the ICAV will be held in Ireland at least once per calendar year and not more than 15 months shall elapse between the date of one annual general meeting of the ICAV and that of the next. Notice convening the annual general meeting in each year at which the audited financial statements of the ICAV will be presented will be sent to Fund Shareholders at their registered addresses not less than twenty one clear calendar days before the date fixed for the meeting.
The ICAV Directors may call an extraordinary general meeting whenever they think fit. The ICAV Directors shall call an extraordinary general meeting on the requisition of one or more Fund Shareholders holding or together holding at any time not less than 10 per cent. of the voting rights of the ICAV. Extraordinary general meetings may also be convened directly by one or more shareholders of the ICAV holding, or together holding, at any time not less than 50 per cent. of the voting rights of the ICAV.
The Fund's financial year is a calendar year ending on 31 March in each year. The first financial year end will be 31 March 2018. The Fund will prepare a first set of interim accounts for the period ending 30 September 2017 and will not produce interim accounts for each subsequent year thereafter.
The Fund will provide its first set of audited accounts within eighteen months of establishment and thereafter audited accounts will be provided annually. Annual reports and audited accounts of the Fund will be sent to Fund Shareholders no later than six months after the end of the period to which they relate and will include a detailed breakdown of management costs and Fund costs.
14 Duration of the Fund
Unless terminated earlier as provided for below, the term of the Fund is 10 years from the initial closing date of the Fund (such term being due to expire in 2027), unless extended by one or two consecutive one year periods, in each case on a special resolution of non-management investors in the Fund. The ICAV Directors may elect to terminate the Fund earlier if the Fund has disposed of all of its assets or as provided for below.
At the end of the Fund's fixed term, the Fund will liquidate its remaining portfolio of investments and return the net proceeds to Fund Shareholders and/or will make payments in kind to Fund Shareholders, in each case through the compulsory repurchase or redemption of shares in the Fund. The ICAV Directors will then apply to the Central Bank of Ireland for withdrawal of the Fund's approval. If the Fund is the sole sub-fund of the ICAV at that time, the ICAV will then be wound-up and the ICAV Directors will apply to the Central Bank of Ireland for revocation of the ICAV's authorisation.
Notwithstanding the above, the Directors may also cancel all undrawn commitments of Fund Shareholders and cause SCAIFM to conduct an orderly disposal of the assets of the Fund and cause it to be wound up if the ICAV and SCAIFM determine in good faith, having consulted with the advisory board of the Fund, that such action would be advisable and in the best interests of a majority of Fund Shareholders as a result of a material change in the legal or regulatory status of the ICAV or otherwise in accordance with applicable law.
15 Fees and expenses of the Fund
14.1 Under the terms of the Fund AIFM Agreement, the ICAV has agreed to pay SCAIFM a fee (''Base Fee''), accrued, calculated and payable quarterly in arrears from the initial closing date of the Fund (which was 1 March 2017) based on the aggregate of the aggregate Commitments of the Fund, and calculated as follows:
Year 1 2.30 per cent.
Year 2 2.00 per cent.
Year 3 2.00 per cent.
Year 4 2.00 per cent.
Year 5 2.00 per cent.
Year 6 1.50 per cent.
Year 7 1.50 per cent.
Year 8 1.25 per cent.
Year 9 1.00 per cent.
Year 10 1.00 per cent.
14.2 The Fund Administrator is entitled to an annual fee of 0.01 per cent. of the Fund NAV accrued and calculated as at each Fund Valuation Day and payable quarterly in arrears, subject to a minimum fee of €9,000 per quarter.
14.3 The Fund Company Secretary is entitled to an annual fee of €12,000.
14.4 The Fund Depositary is entitled to an annual fee of 0.03 per cent. of the Fund NAV accrued and calculated as at each Fund Valuation Day and payable quarterly in arrears, subject to a minimum fee of €9,750 per quarter. The Depositary is also entitled to additional fees to be agreed between the Fund and the Fund Depositary for certain additional services.
14.5 The ICAV may pay annual fees of up to €20,000 per annum to each ICAV Director and alternate director of the Fund. Each of Barry Downes, Brian Kinane and Toby Raincock have waived their entitlement to an annual fee for the life of the ICAV. No other remuneration will be payable by the ICAV to the ICAV Directors other than for out-of-pocket expenses reasonably incurred by them in the performance of their duties to the ICAV. Employees of SCAIFM will not be entitled to charge any fee for acting as ICAV Directors.
14.5 Other ongoing operational expenses of the Fund include transactional costs, organisation expenses, professional fees, printing and distribution fees, legal fees, stamp duty and similar taxes, insurance premia and board and committee expenses.
16 Further information
Further information about the Fund is set out in Part 10 of the Admission document.
DIRECTORS AND MANAGEMENT
1 Directors
The Directors are responsible for the determination of the Company's investment policy and strategy and have overall responsibility for the Company's activities including the review of investment activity and performance and the control and supervision of SCAIFM. All of the Directors are non-executive and all, with the exception of Gareth Burchell, are independent of SCAIFM.
The Directors will meet at least four times per annum, and the Audit Committee will meet at least twice per annum.
The Directors are as follows:
Sean Nicolson (Chairman)
Sean Nicolson is a corporate financier with over 25 years' experience of corporate and investment finance. He has acted on and assisted a wide range of companies to raise finance from venture capital and private equity investors and has also advised investment funds and investment managers. In addition he has advised on flotations (including IPOs and reverse takeovers) and fundraisings on the main market of the London Stock Exchange and AIM. He has worked across a variety of sectors including technology, media, telecoms and life sciences.
Mr. Nicolson is currently a director and chairman of EVR Holdings plc, the AIM traded owner of MelodyVR. In that role he led EVR Holdings through the acquisition of MelodyVR and its subsequent fundraisings. Mr. Nicolson is also a director of and investor in a number of unlisted companies. He was previously an executive director of AIM traded drug discovery company e- Therapeutics plc, having advised that company on all of its venture capital fundraisings, its flotation on AIM and subsequent placings. Prior to his commercial roles, Mr. Nicolson was a corporate finance partner of a UK top 40 law firm in which role he advised companies and founders at all growth stages on venture capital and private equity investments, flotations and mergers and acquisitions. He also advised merchant banks and brokers on flotations and secondary share issues and worked with a number of universities to develop and deliver technology transfer strategies.
Chris Boody
Chris Boody works in the Strategic Business Development team for Microsoft. Mr. Boody is focused on the Connected Vehicle market segment and Autonomous Driving technology programs. He works with major automobile makers world-wide to digitally transform their businesses.
Prior to joining Microsoft, Mr. Boody was the Chief Technology Officer of SVG Partners in California, USA. He was responsible for managing SVG's Engineering Services, Innovation (LAB353) and Startup Accelerator programs (THRIVE). He worked directly with the CEO to help establish a Venture Capital fund and advise the CEO on investment options for promising startups.
Mr. Boody has over 20 years' experience in Mobile and Software Services management. He started his Mobile career with McCaw Cellular communication, focused on the first Mobile Operator deployment of Wireless Data in 1995.
During his career with AT&T, Mr. Boody managed Engineering and Architecture teams, partnered with Developers to enhance mobile ecosystems, and ran a multi-billion-dollar Consumer Messaging business.
Mr. Boody serves on management boards for technology start-ups and recently joined the Chancellor's Advisory Board for the University of Washington. He was recognized for his strong leadership and mentoring of Irish technology company CEOs by receipt of the Meitheal Award from Irish Prime Minister Brian Cowan.
Mr. Boody holds a Bachelor of Science degree in Business Administration from California State University, Fresno and a Master of Management from the University of Washington.
Gareth Burchell
Gareth Burchell began his career in the insurance industry and spent three years at RBS Insurance prior to beginning his career in investment advice and management. Mr. Burchell is currently Head of Shard Capital Stockbrokers and chairs an investment committee that specialises in providing funding for both listed and unlisted small companies. Gareth has had a focus on the small cap arena for 15 years and he and his team have provided £90 million of funding across 221 companies. He has an in-depth knowledge of the UK listing process of various small cap exchanges.
2 The AIFM
The Company has appointed Shard Capital AIFM LLP (''SCAIFM'') to provide investment management services. SCAIFM will act as the Company's alternative investment fund manager for the purposes of the AIFM Rules.
SCAIFM is part of the Shard Capital Partners group, a specialist investment manager and corporate finance adviser in micro and small cap investment. The Shard Capital Partners group has assets under management and administration of approximately €1.1 billion. SCAIFM is authorised and regulated by the FCA in the conduct of its investment business.
SCAIFM is also the manager of the Fund.
At SCAIFM, responsibility for managing the Company's portfolio will be led by the following individuals:
Gareth Burchell
Mr. Burchell's biography is set out under the heading ''Directors'' above.
James Lewis
James Lewis is the Founder and Managing Partner of Shard Capital Partners and owner of Rubrics Asset Management. The group has assets under management and administration of approximately e1.1 billion. Prior to entering the asset management sector, he expanded a boutique Dutch brokerage from a handful of staff in Amsterdam to a diversified brokerage company with over 150 personnel spread across nine countries, transacting deals covering a wide range of financial instruments including high grade/high yield fixed income and loans, structured products, and exchanged traded equities. With steady organic growth over the last five years Shard Capital Partners now operates several teams of high quality executives executing fixed income, stockbroking and direct lending strategies, combined with a strong focus on the client driven business.
Brian Kinane
Mr. Kinane's biography is set out under the heading ''The ICAV Directors'' above.
Barry Downes
Mr. Downes' biography is set out under the heading ''The ICAV Directors'' above.
The Company and SCAIFM have entered into the Management Agreement, a summary of which is set out in paragraph 11.2 of Part 10 of this document, under which SCAIFM has been given sole responsibility for the discretionary management of the Company's assets (including uninvested cash) in accordance with the Company's investment policy, subject to the overall control and supervision of the Directors.
Administrator
The Company and the AIFM have appointed Apex Fund Services (Ireland) Limited as the Administrator and Company Secretary of the Company, pursuant to the Administration Agreement (further details of which are set out in paragraph 11.3 of Part 10 of this document).
The Administrator will be responsible for providing administrative services to the Company. These will include general fund administration services (including calculation of the NAV based on the data provided by SCAIFM), bookkeeping, and accounts preparation. The Administrator will also be responsible for providing company secretarial services to the Company.
The Administrator is registered in Ireland with registered number 433608. The registered office of the Administrator is 1st Floor, Block 2, Harcourt Centre, Harcourt Street, Dublin 2, Ireland. The Administrator's telephone number is +353 21 463 3366.
3 Fees and expenses
Formation and initial expenses
The formation and initial expenses of the Company are those which are necessary for the incorporation of the Company, First Admission and the First Issue. These expenses include fees and commissions payable under the Placing Agreement, Receiving Agent's fees, admission fees, printing, legal and accounting fees and any other applicable expenses which will be met by the Company and paid on or around First Admission out of the gross proceeds of the First Issue. The expenses will be written off to capital in the Company's first accounting period.
The costs and expenses of the First Issue (including all fees, commissions and expenses payable to Shard Capital) will be paid by the Company. Such costs and expenses are not expected to exceed approximately £2.75 million, assuming the maximum gross proceeds of £50 million are received under the First Issue.
Ongoing annual expenses
Ongoing annual expenses include the following:
(i) SCAIFM
Under the Management Agreement, SCAIFM is entitled to receive from the Company a management fee, payable quarterly in advance, equal to 1.25 per cent. per annum of the Net Asset Value.
SCAIFM is also entitled to receive a performance fee equal to 15 per cent. of any excess returns over a high watermark, subject to achieving a hurdle at a rate of 8 per cent. in respect of each Performance Period.
The performance fee is calculated on the following basis in each Performance Period: If, and only if, A 4 (B x 1.08), then PF = ((A-B) x C) x 15 per cent.
Where:
PF is the performance fee, if any, payable to SCAIFM; A is the Adjusted NAV per Ordinary Share;
B is the High Watermark NAV per Ordinary Share; and
C is the time weighted average number of Ordinary Shares in issue during the relevant Performance Period.
In addition, if a class of C Shares has converted into Ordinary Shares during a Performance Period, an additional Performance Fee shall be paid by the Company to the AIFM on the following basis:
If, and only if, D 4 (E x 1.08 x F/365), then PF, if any = ((D-E) x G) x 15 per cent. D is the Adjusted NAV per C Share;
E is the issue price of the relevant class of C Shares;
F is the number of calendar days in the C Share Period; and
G is the time weighted average number of C Shares in issue during the relevant C Share Period.
For these purposes:
''Adjusted NAV per C Share'' means the Net Asset Value per C Share on the Conversion Date, adjusted by adding back any performance fee accrual in respect of such C Share Period;
''Adjusted NAV per Ordinary Share'' means the Net Asset Value per Ordinary Share on the last Business Day of each Performance Period, adjusted by adding back any performance fee accrual in respect of such Performance Period;
''C Share Period'' means the period beginning on the date of issue of a class of C Shares and ending on the Conversion Date;
''Conversion Date'' means the date of conversion of a class of C Shares;
''High Watermark NAV per Ordinary Share'' means the Net Asset Value per Ordinary Share as at the last Business Day of the Performance Period in respect of which a performance fee was last earned, adding back the effect of any performance fee paid in respect of such Performance Period (or, if no performance fee has yet been earned, the Issue Price); and
''Performance Period'' means (i) the period beginning on the date of First Admission and ending on 31 March 2018 and (ii) each subsequent period corresponding to each accounting period of the Company.
In respect of each Performance Period, the Adjusted NAV per Ordinary Share and the Adjusted NAV per C Share will be adjusted to reflect the impact from any capital return, dividend or distribution to Shareholders and any issue of new Shares during the relevant Performance Period, in each case as at the time of such capital return, dividend, distribution or issue and on a pence per Share basis.
If at any time a Potential Adjustment Event shall occur, SCAIFM and the Company shall discuss in good faith what adjustment would be appropriate for the purpose of the performance fee. Failing such agreement, the Company shall instruct the Auditors, or other independent firm of accountants, to report to the Company and SCAIFM regarding any adjustment which in the opinion of the Auditors, or other independent firm of accountants, shall be appropriate to be made for the purpose of the calculation of the performance fee. ''Potential Adjustment Event'' means, in relation to the Company, every issue by way of capitalisation of profits or reserves and every issue by way of rights or bonus and every consolidation or sub-division or reduction of capital or share premium or capital dividend or redemption of Ordinary Shares, or other reconstruction or adjustment relating to the share capital of the Company (or any shares, stock or securities derived therefrom or convertible thereinto) and also includes any other amalgamation or reconstruction affecting the share capital of the Company (or any shares, stock or securities derived therefrom or convertible thereinto).
The performance fee will be calculated on behalf of the Company by the Administrator, based on the audited NAV as at the end of each Performance Period.
SCAIFM has agreed that any performance fee payable to it in respect of a given Performance Period shall be satisfied by the issue of new Ordinary Shares (''Performance Fee Shares''), unless the Board determines otherwise (whether generally or in any specific instance). The issue price of each Performance Fee Share will be the Net Asset Value per Ordinary Share at the time of issue. Any Performance Fee Shares shall be issued within 20 Business Days of publication of the audited NAV as at the end of each Performance Period. Any Performance Fee Shares issued to SCAIFM will be subject to the provisions of the Lock-in Agreement.
Pursuant to the Management Agreement, and notwithstanding the general discretion of the Board to pay any performance fee in cash if it so determines, the Company and SCAIFM have agreed that to the extent that Ordinary Shares acquired and held by SCAIFM, and any parties acting in concert with it (within the meaning of the Takeover Code), would exceed (in aggregate) 29.99 per cent. of the total number of voting Shares in issue, or the issue of Performance Fee Shares would cause the Company to become a close company for UK taxation purposes, the relevant proportion (as determined by the Board in its absolute discretion) of any performance fee to which SCAIFM is entitled shall be paid in cash. To the extent that the Company does not have the requisite Shareholder authorities to allow it to allot such Ordinary Shares, it is anticipated that the Board will exercise their discretion to pay the part of the performance fee that is affected in cash.
Any management fee and performance fee payable by the Company in accordance with the Management Agreement shall be reduced by an amount equal to any management fee and performance fee received by SCAIFM, or any member of its group, from the Fund or any Further Fund in respect of the Company's investment in the Fund or any Further Fund.
(ii) Administrator
Under the terms of the Administration Agreement, the Administrator is entitled to an annual fee equal to 0.08 per cent. of Gross Assets up to the equivalent of €100 million, 0.06 per cent. of Gross Assets in excess of €100 million and up to €200 million, and 0.05 per cent. Of Gross Assets in excess of €200 million, subject to a minimum fee of €28,000 per annum (exclusive of VAT). The Administrator is also entitled to certain event-driven fees. In respect of company secretarial services, the Administrator is entitled to a fee of £25,000 per annum (exclusive of VAT). The Administrator is also entitled to the reimbursement of out of pocket expenses by way of a charge of 10 per cent. of the annual administration fee.
(iii) Depositary
Under the terms of the Depositary Agreement, the Depositary is entitled to an annual fee of
0.03 per cent. of NAV accrued on a daily basis and payable monthly in arrears, subject to a minimum fee, depending on the activity of the Company, of between £2,000 and £2,917 per month. The Depositary is also entitled to an initial set-up fee of £5,000. These fees are expressed exclusive of VAT, where applicable. Additional fees will be agreed between the Company and the Depositary for the custody of any financial instruments held by the Company. The Depositary is also entitled to the reimbursement of certain expenses.
(iv) Registrar
Under the terms of the Registrar Agreement, the Registrar is entitled to an annual maintenance fee per Shareholder account per annum, subject to a minimum annual fee of
£3,600 (exclusive of VAT). The Registrar is also entitled to certain activity fees. The Registrar is also entitled to the reimbursement of certain expenses.
(v) Directors
Each of the Directors is entitled to receive a fee from the Company at such rate as may be determined in accordance with the Articles. The current fees are £24,000 for each Director per annum. Gareth Burchell has agreed to waive his Director's fee.
All of the Directors are also entitled to be paid all reasonable expenses properly incurred by them in attending general meetings, board or committee meetings or otherwise in connection with the performance of their duties. The Board may determine that additional remuneration may be paid, from time to time, to any one or more Directors in the event such Director or Directors are requested by the Board to perform extra or special services on behalf of the Company.
(vi) Other operational expenses
Other ongoing operational expenses (excluding fees paid to service providers as detailed above) of the Company will be borne by the Company including travel, accommodation, printing, audit, finance costs, due diligence and legal fees. All reasonable out of pocket expenses of SCAIFM, the Administrator, the Depositary, the Registrar and the Directors relating to the Company will be borne by the Company.
4 Conflicts of interest
SCAIFM, the manager of the Company, and its respective officers and employees may from time to time act for other clients or manage other funds, which may have similar investment objectives and policies to that of the Company. In particular, SCAIFM is also the manager of the Fund. Circumstances may arise where investment opportunities will be available to the Company which are also suitable for one or more of such clients of SCAIFM or such other funds.
Furthermore, SCAIFM is entitled to receive a performance fee for its services to each of the Company and the Fund which is based, in part, on the value of the Company's or, as applicable, the Fund's investments. This creates a potential conflict of interest as SCAIFM will have involvement in the valuation of the Company's and the Fund's investments.
The Directors have satisfied themselves that SCAIFM has procedures in place to address potential conflicts of interest and that, where a conflict arises, SCAIFM will seek to resolve that conflict in accordance with the Management Agreement, the AIFM Rules and with the applicable rules of the FCA. In particular, the Directors have satisfied themselves that where a conflict arises in respect of the allocation of an investment opportunity, SCAIFM will allocate the opportunity on a fair basis and in accordance with such provisions and rules.
5 Dealing commission
SCAIFM may effect transactions with or through the agency of another person with whom SCAIFM or an entity affiliated to SCAIFM has arrangements under which that person will, from time to time, provide to or procure for SCAIFM and/or an affiliated party goods, services or other benefits such as research and advisory services. No direct payment may be made for such goods or services but SCAIFM may undertake to place business with that person provided that person has agreed to provide best execution with respect to such business and the services provided must be of a type which assists in the provision of investment services to the Company.
6 Corporate governance
The Board of the Company has considered the principles and recommendations of the AIC Code by reference to the AIC Guide. The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company as an investment company.
The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to Shareholders.
With effect from First Admission, the Company intends to comply with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions relating to: the role of the chief executive; executive directors' remuneration; and the need for an internal audit function. For the reasons set out in the AIC Guide, the Board considers these provisions are not relevant to the position of the Company, being an externally managed investment company and the Company does not therefore comply with them.
It is a principle of the AIC Code that a majority of the board should be independent of SCAIFM. On First Admission, there will be three Directors on the Board. Each of the Directors other than Gareth Burchell is considered to be independent. Gareth Burchell is not considered to be independent for the purposes of the AIC Code because he is an associate of Shard Capital, an associate of SCAIFM. The Board has carefully considered the Directors' independence and has determined that the Directors will discharge their duties in an independent manner.
The Company's Audit Committee is chaired by Chris Boody, consists of all the Directors with the exception of Gareth Burchell and will meet at least twice a year. The Board considers that the members of the Audit Committee have the requisite skills and experience to fulfil the responsibilities of the Audit Committee. The Audit Committee will examine the effectiveness of the Company's control systems. It will review the half-yearly and annual reports and also receive information from SCAIFM. It will also review the scope, results, cost effectiveness, independence and objectivity of the external auditor.
In accordance with the AIC Code the Company has established a Management Engagement Committee which is chaired by Sean Nicolson and consists of all of the Directors with the exception of Gareth Burchell. The Management Engagement Committee will meet at least once a year or more often if required. Its principal duties are to consider the terms of appointment of SCAIFM and it will annually review that appointment and the terms of the Management Agreement. The Management Engagement Committee will also review the continued appointment and performance of the Company's other service providers.
This information is provided by RNS
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