Elderstreet VCT Plc Offer For Subscription

 
TIDMEDV 
 
   Draper Esprit VCT plc 
 
   Legal Entity Identifier: 2138003I9Q1QPDSQ9Z97 
 
   11 January 2019 
 
   Offer for Subscription 
 
   The board of Draper Esprit VCT plc (the "Company") is pleased to 
announce that the Company has today published an offer document (the 
"Offer Document") relating to an offer for the subscription in respect 
of up to GBP7 million worth of new ordinary shares (the "Offer"). 
 
   The Offer will open on 11 January 2019.  In respect of the 2018/19 tax 
year, the Offer will close at 4.00 p.m. on 5 April 2019 and, in respect 
of the 2019/20 Tax Year, it will close at 4.00 p.m. on 31 May 2019 
(unless extended or fully subscribed earlier). 
 
   The Chairman's letter to Shareholders and potential Investors which is 
included in the Offer Document is reproduced below. 
 
   Dear Shareholders/Investors 
 
   New GBP7 million public offer for Ordinary Shares 
 
   As stated in our Report & Accounts to 31st March 2018, our managers, 
Elderstreet, formed a close association with Draper Esprit, the award 
winning and successful technology investment manager, starting from 16 
November 2016 thus transforming the prospects of this VCT. Draper Esprit, 
across its various funds, has over GBP330 million invested, largely in 
knowledge intensive, early and growth stage technology companies and its 
EIS funds have received the highest rating for the last five years 
running from Martin Churchill of Tax Efficient Review, a well-respected 
VCT analyst. The Board is pleased to have accepted assurances from 
Draper Esprit of their continuing intention to provide a flow of 
investment opportunities to the VCT and their intention to exercise 
their option to become the VCT's portfolio manager. The VCT has 
consequently been renamed Draper Esprit VCT plc. 
 
   I am therefore delighted to offer you the chance to invest in what is 
already an award winning VCT now increasingly associated with this 
leading, high-rated technology investor. Your Board believe that 
investing in knowledge intensive, high growth technology companies 
inside a VCT tax wrapper makes an attractive investment offering. These 
technology companies have the potential to grow into valuable companies 
as shown by the Draper Esprit track record on page 8. Draper Esprit 
target a portfolio return of 20% per annum, and the VCT targets a 
potential tax free yield of 6% to 7% per annum as shown on page 9. 
 
   A recent example of a Draper Esprit portfolio company is Graphcore, a 
Bristol based silicon chipmaker developing AI Processors. The Draper 
Esprit plc and EIS funds had invested into Graphcore earlier in 2016. In 
December 2018, Graphcore gained 'unicorn' status when it closed a $200 
million funding round with a valuation above $1.5 billion. Investors 
into Graphcore alongside the Draper Esprit funds included well know 
names in the venture capital and corporate investment world such as 
Sequoia Capital, Atomico, Amadeus Capital, Robert Bosch Ventures, C4 
Ventures, Dell Technologies Capital, Foundation Capital, and AI experts 
such as Demis Hassabis (co-founder of DeepMind) as an angel investor. 
 
   Since raising just over GBP20 million in the last two tax years, and 
since building its association with Draper Esprit, your Company has 
committed to fourteen new technology investments totalling GBP11.25 
million since April 2017. At the time of writing, twelve of these deals 
have completed and two are subject to HMRC giving VCT advanced assurance 
in writing to the company. Given this strong rate of investment, your 
Board consider this is a good time to raise a limited amount of further 
capital. 
 
   The recent changes to the VCT legislation designed to encourage more 
investment into fast growing companies has had a significant impact on 
the VCT industry. The Board believes that many established VCT managers 
can no longer access the type of deal flow which they have nurtured over 
many years. This has led to a significant reduction in their ability to 
invest money. A typical Draper Esprit investment, by contrast, would be 
largely unaffected by these changes, allowing them to continue to invest 
in the sectors from which they have nurtured a strong deal flow. This is 
illustrated by the notable increase in the number of deals the VCT has 
invested in since the Manager's co-investment agreement with Draper 
Esprit was enacted. 
 
   Draper Esprit plc has access to quality growth opportunities often in 
much larger and more mature companies compared to other VCT managers. By 
co-investing alongside the Draper Esprit plc and the EIS, the VCT gains 
access to some companies requiring funds in excess of $10m. There are 
many other VCTs without access to such deal flow. These deals typically 
have relatively shorter investment holding periods and are not as prone 
to fail completely. For example, Draper Esprit plc has only had one 
complete write off since its IPO in 2016. 
 
   Portfolio 
 
   Today, by percentage of net asset value, new subscribers would be buying 
into a portfolio made up of 31% Draper Esprit technology investments 
(including committed but not completed investments), cash of 30% to be 
invested in further technology investments and a legacy portfolio 
representing 39% of the total. 
 
   Consequently, if this offer is taken up in full, once invested, the 
Company will have over GBP30 million allocated predominantly to 
technology investments which will be driven by one of the UK's leading 
technology investment managers. 
 
   As for the legacy portfolio, 91% is made up of four companies. Two are 
AIM quoted and the other two are private companies which are profitable 
engineering and manufacturing businesses and which the Board are 
confident can be realised at considerable gain in the future. 
 
   A VCT for income 
 
   In 2018 the Company has paid dividends of 3p per share. The Board 
believes that in a generally low global interest rate environment the 
possibility of a tax free yield of 3p (equivalent to a 6.9% tax free 
return based on the Estimated Offer Price after factoring in initial tax 
reliefs), represents a good yield and will help to deliver consistent 
returns in the future. Further details on the potential yields can be 
found on page 10. Investors should note that the level of dividend is 
not guaranteed, and no profit forecast is to be inferred or implied from 
these statements. 
 
   Early Investment Incentives 
 
   An Early Investment Incentive is being offered for Applications for New 
Ordinary Shares which are received and accepted in good time. The 
Manager will rebate to early investors 1.5% of the Promotion Fee, in 
respect of which the Investor will receive additional New Ordinary 
Shares and will also rebate the cost of initial commission payable to 
authorised intermediaries where this saving is passed on by the 
intermediary to the Investor, subject to a cumulative maximum rebate of 
4.0%, for applications received before the deadline of 28 February 2018. 
 
   Key tax benefits 
 
   -- 30% income tax relief is available on the amount subscribed up to 
GBP200,000, provided the New Ordinary Shares are held for at least five 
years. Further information on the initial tax benefits can be found on 
page 33. 
 
   -- Tax free dividends, distributions and capital gains. 
 
   Furthermore, the Company's focus on Knowledge Intensive technology 
companies is in line with recent changes to VCT investment rules and the 
Government's drive to refocus VCT investment on higher growth companies. 
 
   Next steps 
 
   In order to invest please read this document and then complete the 
Application Form which is set out at the end of this document. If 
Investors have any questions regarding this investment, they should 
contact their own financial intermediaries. For questions relating to an 
application, please telephone Elderstreet on 020 7831 5088. Prospective 
Investors should note that no investment advice can be given by 
Elderstreet and their attention is drawn to the risk factors set out on 
pages 25 -- 27 of this document. 
 
   Yours sincerely 
 
   David Brock 
 
   Chairman 
 
   A downloadable version of the Offer Document is available from 
https://www.globenewswire.com/Tracker?data=8hHdLd-dkN0LK4Udb5Tk0kyINu5anUXylToiJChw2BjG-PFKU1h2MHW9Hs3p9fun3s83MycTzquEX27LCblHqhOkWlPIhNUippatjTu67W8= 
www.elderstreet.com. The Offer Document will also be submitted to the 
National Storage Mechanism and will shortly be available for inspection 
at www.morningstar.co.uk/uk/NSM. 
 
 
 
 

(END) Dow Jones Newswires

January 11, 2019 08:53 ET (13:53 GMT)

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