12SummarySocial Impact Venture Capital Trust (VCT)Type Specialist, 8 year planned exit VCTSize £20 million FSE Fund Managers Limited (part of the FSE Group)Managers Social Finance Profitable and/or growth companies delivering measurableFocus social impactMinimum investment size £2,000Expected timing For tax years 2012/13 and 2013/14 VCT is a well-known product for new market with rising demand
13Social Returns: Four Pillars of Social ImpactBuilding Futures Community Socially-motivated Health and Cohesion Brands EducationCompanies engaging Companies working in Companies promoting Companies buildingwith people who are local communities to thoughtful consumer human capital bymarginalized, support cohesion and brands that create enhancing health andvulnerable or improve access to their products and education provision fordisadvantaged to help services and services in an ethical or individuals.build their futures. opportunities. socially-motivated way.Examples: Examples: Examples: Examples:Careers Development Charity Technology Cafédirect Bromley HealthcareGroup (CDG) Trust (CTT) Divine Chocolate Central Surrey HealthCRI HCT Group (Hackney JustGiving Avenues Group Community Transport) JoJo Maman Bébé Cool2Care Greenwich Leisure Timpson Limited (GLL) Commercial revenues generating profit for social purpose
14Financial Returns: Income and Return of CapitalInvestment policy:• Capital preservation focus• Returns driven by “current yield”• Repayment driven by “non exit” or “managed exit” eventsInvestment Type Returns Capital RepaymentEstablished Current Yield: High Non-Exit: Refinancing / recapitalisationSocial Enterprises Exit Yield: Low / Nil Exit: Pre-commitment-to-find buyer Capital gain unlikely to be main driver of returnContract-underpinned Current Yield: High Non-Exit: Refinancing / recapitalisationSocial Enterprises Exit Yield: Low / Nil Exit: Pre-commitment-to-find buyer Capital gain unlikely to be main driver of returnEarly-stage Current Yield: Medium / Low Non-Exit: Refinancing / recapitalisationSocial Enterprises Exit Yield: High / Medium Exit: Commitment-to-find buyer - or -core business sale Capital gain may be material component of return Focus on established and/or contract underpinned enterprises
15Worked Example: Bromley Healthcare“Established social enterprises whose revenue streams are expected tobe underpinned wholly or partially by delivery contracts”Business Model Social Returns Financial Returns Investment StructureShort term – better run Community health, e.g. c.£40M turnover Assumed investmentcommunity services period of 5 years(Nursing and therapy Healing time of leg £10B market (UKservices) in Bromley, wounds reduced from market for community Structured with a mix ofincreasingly specialised 21 to 5 weeks (pilot) health care) debt and equity +services to avoid structured exithospital admissions and Improved productivity Significantspeed discharge. + 15% (18 months) = improvement on 1% Majority of the returnMid term: Health more patient time launch margin will be linked to theManagement Model debt instrumentdelivering health Do not attends 13% - 5% Growth 100% ahead ofoutcomes on a payment budgetby results model. Variable competitionFormed by 800 staff‘spinning-out’ of theNHS to form a newcommunity interestcompany (C.I.C.)
16Social Impact VCT: Offering to the Shareholder 1. Support the growth of socially-motivated companies which make a distinct positive contribution to improving UK society 2. Capital preservation and predictable cashflows due to focus on established companies and using debt-like, VCT-compliant structures 3. 30% income tax relief in year of investment, tax free dividends and capital gains* 4. Planned-exit – return of capital in years 6, 7 and 8** 5. Dividends planned in respect of the second financial year 6. Annualised Return of 2-3 % post costs and before any tax benefit to an investor, translating into a target return of 118.5p (tax free) on every 70p net invested****UK income tax payers, aged 18 or over, who acquire no more than £200,000 worth of VCT shares in a tax year. The UK tax treatment ofVCTs is on a first in first out basis and therefore tax advice should be obtained before investors dispose of their shares. The income taxrelief is given at the rate of 30% on the amount subscribed regardless of whether the qualifying investor is a higher rate or basic rate taxpayer, provided that the relief is limited to the amount which reduces the qualifying investor’s income tax liability to nil.**In many cases, it is expected that investment will be held for a 5 year period, structured with a mix of debt and equity, under whichthe majority of the return will be linked to the debt instrument, which will have a finite life to facilitate Social Impact VCT’s exit fromthe investment.***100p gross less 30p VCT income tax relief. IRR (Internal Rate of Return), i.e. annualised effective compounded return rate,calculated as the rate at which the net present value of costs of the investment equals the net present value of the benefits.
17Investment Manager and Investment AdviserFSE Fund Managers Limited(1) Social Finance Limited(1)Community Economic and social impact fund Not-for- Corporate finance advisor management Improve access to capital for thoseInterest profit driving social changeAuM £31.8M + Angel Investor Network Social Impact Measurement, monitoring and reportingExperienced, CEO: 30+ years funding experienceequity and Design and 1st Social Impact Bond (SIB) in Head of Equity Funds: 15+ years September 2010 that fundsdebt team experience in VC and PE investment delivery of interventions to reduce reoffending Social Impact among short sentence offenders from Head of Debt Funds: 20+ years Bonds HMP Peterborough experience in SME lending Now 4 SIBs under managementProactive “Hands on” due diligence and £10 million (2010-2012) monitoring Capitalinvestee Raisingmanagement Mentor, Coaching and NXD support/ support Private Robin Black, 27-year career building and managing entrepreneurial Follow on investment: 204 investees equity raised £116M+additional funding businessesAccelerator £14.6m + invested via 173 loans Social Structuring expertiseFund Understanding of socially-motivated 10% return on investments (pre enterprise companies’ sensitivity around external overheads, post provisions) via current network capital yield only Independent Investment Committee and separate VCT Board(1) The FSE Group’s subsidiary FSE Fund Managers is authorised and regulated by the Financial Services Authority. FSA No. 458820 Social Finance is authorised and regulated by the Financial Services Authority. FSA No: 497568.
18Why Invest?•Become a lead investor in this new, growing and exciting market•Provide capital for successful social entrepreneurs who make a real difference inaddressing social issues•Receive potential projected returns of 2-3% over the life of the VCT, an up-front30% tax break and tax free dividends*•Social Impact VCT will be managed by a leading social impact investmentmanagement team, with breadth of experience and excellent track record. The teamcombines investment on commercial principles with in-depth understanding ofsocial impact Social Impact VCT is an investment to be proud of.* Assuming £20m capital raise and subject to eligibility
19Further InformationSocial Impact VCT website:www.socialimpactvct.co.ukFurther questions, please contact:Social Finance Ltd131-151 Great Titchfield StreetLondon W1W 5BBTel 0207 667 6370Marechale Capital Plc3rd FloorNew Broad Street House35 New Broad StreetLondon EC2M 1NHTel 020 7628 5582Social Finance is authorised and regulated by the Financial Services Authority. FSA No: 497568.The FSE Group’s subsidiary FSE Fund Managers is authorised and regulated by the Financial Services Authority. FSA No. 458820
20DisclaimerThis document comprises the presentation of Social Impact VCT Plc (the "Company") concerning the proposed admission to trading on the official list of the LondonStock Exchange plc and to trading on the main market of the London Stock Exchange plc. This document is being solely issued to and directed at (a) persons whohave professional experience in matters relating to investments and who are investment professionals as specified in Article 19(5) of the Financial Services andMarkets Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial Promotions Order”); and (b) persons certified by an authorised person assophisticated investors within the meaning of Article 50 of the Financial Promotions Order (but for the avoidance of doubt not those who are self-certified within themeaning of Article 50A of that Order).This document is exempt from the general restriction on the communication of invitations or inducements to enter intoinvestment activity and has therefore not been approved by an authorised person, as would otherwise be required by section 21 of the Financial Services and MarketsAct 2000. Any investment to which this document relates is available to (and any investment activity to which it relates will be engaged with) only those personsdescribed in (a) or (b) above. Persons who do not fall within the above categories of investor should not take any action nor rely upon this document, but shouldreturn it immediately to Social Finance (“Investment Adviser”), 131-151 Great Titchfield Street, London W1W 5BB.It is a condition of your receiving this document that (i) you fall within, and you warrant to the Company that you fall within, one of the categories of person describedin (a) and (b) above; and (ii) if you fall within category (b) above, it is a condition of your receiving this document that you warrant to the Company that: (aa) you are aperson who has a current sophisticated investor certificate, signed by an authorised person and dated no earlier than 36 months preceding the date of receipt of thisdocument, confirming that, in the opinion of such person, you are sufficiently knowledgeable to understand the risks associated with an investment in an mainmarket quoted company; and (bb) that within the last 12 months you have signed a statement in the terms set out in Article 50(1)(b) of the Financial PromotionsOrder. If you are uncertain with regards to your eligibility you should seek independent professional advice in this regard.This document is for informational purposes only and does not constitute nor forms any part of any offer or invitation to sell or issue or any solicitation of any offer topurchase or subscribe for any shares in the Company nor shall they or any part of them, or the fact of their distribution, form the basis of, or be relied on in connectionwith, any contract with the Company relating to any securities. Any decision regarding any proposed subscription or purchase of shares in the Company must bemade solely on the basis of the information contained in the prospectus to be issued by the Company (the “Prospectus”). This document is not intended to bedistributed or passed on, directly or indirectly, or to any other class of persons. It is being supplied to you solely for your information and may not be reproduced,forwarded to any other person or published, in whole or in part, for any other purpose. Recipients of this document who intend to apply to subscribe or purchaseordinary shares in the Company following the publication of the Prospectus in final form relating to the Company are reminded that any such application may only bemade on the basis of the information contained in such document which may be different from the information contained in this document.No reliance may be placed for any purpose whatsoever on the information contained in this document, nor on its completeness. Any reliance on this communicationcould potentially expose you to a significant risk of losing all of the property invested by you or the incurring by you of additional liability. No representation orwarranty, express or implied, is given by the Company, its directors or employees, or their respective professional advisers as to the accuracy, fairness, sufficiency orcompleteness of the information, opinions or beliefs contained in this document. Save in the case of fraud, no liability is accepted for any loss, cost or damage sufferedor incurred as a result of the reliance on such information, opinions or beliefs. Recipients of this document should conduct their own investigation, evaluation andanalysis of the business, data and property described in this document.If you are in any doubt about the investment to which this document relates, you should consult a person authorised by the Financial Services Authority whospecialises in advising on securities of the kind described in this document. Neither this document, nor any copy of it, may be taken or transmitted into the UnitedStates, Canada, Australia, the Republic of Ireland, the Republic of South Africa or Japan or into any jurisdiction where it would be unlawful to do so.Any failure to comply with this restriction may constitute a violation of relevant local securities laws.Social Finance is authorised and regulated by the Financial Services Authority. FSA No: 497568.The FSE Group’s subsidiary FSE Fund Managers is authorised and regulated by the Financial Services Authority. FSA No. 458820
21Disclaimer (cont.)Venture Capital Trusts (VCTs) were introduced by the UK Government in 1995 to encourage individuals to invest in smaller UK companies. The Government achievedthis by offering VCT investors a series of tax benefits. The total invested in VCTs between 1995 and 2011 was more than £4.2 billion.The Company is structured as a VCT to allow qualifying investors to take advantage of substantial tax benefits, including 30% income tax relief on the amountinvested. The income tax relief means that taxpayers should benefit from a £3,000 reduction in their tax bill for every £10,000 invested, provided that the OrdinaryShares are held for a period of five years. In addition, qualifying investors should benefit from dividends paid by the Company being tax free and no capital gains tax ona disposal of Ordinary Shares. This is only a brief summary of the UK tax position for investors in VCTs and is based on the Company’s understanding of current lawand practice. Investors should seek independent tax advice.Key points to remember about VCTs:•VCTs invest in unquoted shares including new shares of privately owned companies, and new shares of companies that are traded on the Alternative InvestmentMarket (AIM) and PLUS Market.•VCTs are complex and may be higher risk than conventional investment companies. They should be viewed as long-term investments.•Though VCTs offer generous tax benefits, you should not invest in a VCT simply for the tax benefits (also to obtain tax benefits investment should be held for anumber of years).•It can be difficult to sell VCT shares on the secondary market, although some VCTs offer a ‘buy-back’ facility.•Past or simulated performance may not be a reliable indicator towards future performance.•As with any equity investment, returns are not guaranteed and you may get back less than you invest or nothing at all in extreme cases.•If you are unsure whether VCTs are suitable for you, you should take professional advice.Social Finance is authorised and regulated by the Financial Services Authority. FSA No: 497568.The FSE Group’s subsidiary FSE Fund Managers is authorised and regulated by the Financial Services Authority. FSA No. 458820