BRITISH SMALLER COMPANIES VCT PLC

Prospectus • Sep 20, 2023

British Smaller Companies VCT plc British Smaller Companies VCT2 plc

Offers for subscription for the tax year 2023/2024 to raise up to £65 million, in aggregate, with an over-allotment facility of a further £25 million, in aggregate

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about the action to be taken, you should immediately consult your bank manager, stockbroker, solicitor, accountant or other independent financial adviser authorised pursuant to the Financial Services and Markets Act 2000 (FSMA).

This document, which comprises a prospectus relating to British Smaller Companies VCT plc ("BSC") and British Smaller Companies VCT2 plc ("BSC2") (BSC and BSC2 together the "Companies") dated 20 September 2023, has been prepared in accordance with the Prospectus Regulations Rules Instrument 2019 made under Part VI of FSMA, and has been approved for publication by the Financial Conduct Authority as a prospectus under article 20 of the Prospectus Regulation.

The Companies and the Directors, whose names appear on pages 33 and 34 of this document, accept responsibility for the information contained herein. To the best of the knowledge of the Companies and the Directors, the information contained in the Prospectus is in accordance with the facts and the Prospectus makes no omission likely to affect its import. To the extent that information has been sourced from a third party, this information has been accurately reproduced and, as far as the Directors and the Companies are aware, no facts have been omitted which may render the reproduced information inaccurate or misleading. In connection with this document, no person is authorised to give any information or make any representation other than as contained in this document.

Subject to FSMA, the Prospectus Regulation Rules and applicable laws, the delivery of this document shall not, under any circumstances, create any implication that there has been no change in the affairs of the Companies since the date of this document or that the information in this document is correct as at any time after this date.

The Prospectus has been approved by the Financial Conduct Authority, as competent authority under the UK version of Regulation (EU) 2017/1129. The FCA only approves the Prospectus as meeting the standards of completeness, comprehensibility and consistency imposed by the UK version of Regulation (EU) 2017/1129. Such approval shall not be considered as an endorsement of the Companies or the quality of the New Shares that are the subject of this Prospectus. Investors should make their own assessment as to the suitability of investing in the New Shares. The Prospectus has been drawn up as part of a simplified prospectus in accordance with Article 14 of the UK version of Regulation (EU) 2017/1129.

Persons receiving this document should note that Howard Kennedy Corporate Services LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as sponsor for the Companies and no-one else and will not, subject to the responsibilities and liabilities imposed by FSMA or the regulatory regime established thereunder, be responsible to any other person for providing the protections afforded to customers of Howard Kennedy Corporate Services LLP or providing advice in connection with any matters referred to herein.

British Smaller Companies VCT plc

(Incorporated and registered in England and Wales under the Companies Act 1985 with Registered Number 03134749)

British Smaller Companies VCT2 plc

(Incorporated and registered in England and Wales under the Companies Act 1985 with Registered Number 04084003)

Prospectus relating to: Offers for subscription by British Smaller Companies VCT plc and British Smaller Companies VCT2 plc of New Shares to raise up to a maximum of £65 million, in aggregate, with an overallotment facility of a further £25 million, in aggregate, payable in full in cash on application

Sponsor: Howard Kennedy Corporate Services LLP

The Shares of the Companies in issue at the date of this document are listed on the premium segment of the Official List and traded on the London Stock Exchange's main market for listed securities. Applications have been made to the FCA for all of the New Shares to be listed on the premium segment of the Official List and applications will be made to the London Stock Exchange for the New Shares to be admitted to trading on its main market for listed securities. It is expected that such admission will become effective, and that trading will commence, in respect of the New Shares within 10 Business Days of their allotment. The New Shares will be issued in registered form and will be freely transferable in both certificated and uncertificated form and will rank pari passu in all respects with the existing Shares.

This Prospectus does not constitute an offer of, or the solicitation of an offer to subscribe for or buy, any New Shares to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The Offers are not being made, directly or indirectly, in or into the United States, Canada, Australia, New Zealand, Japan or the Republic of South Africa or their respective territories or possessions, and documents should not be distributed, forwarded or transmitted in or into such territories. The New Shares have not been and will not be registered under the United States Securities Act of 1933 (as amended) and may not be offered, sold or delivered, directly or indirectly, in or into the United States, Canada, Australia, New Zealand, Japan or the Republic of South Africa or in any other jurisdiction where to do so would be unlawful.

Your attention is drawn to the risk factors set out on pages 13 and 14 of this document. Prospective Investors should read the whole text of this document and should be aware that an investment in the Companies involves a high degree of risk and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. All statements regarding the Companies' business, financial position and prospects should be viewed in light of such risk factors.

This document is not a KID (key information document) for the purposes of the EU Packaged Retail Investment Insurance Products Regulations or the UK PRIIPs Laws.

The contents of this document and the information incorporated herein by reference should not be construed as legal, business or tax advice. Neither the Companies nor any of the Directors or representatives or advisers are making any representation to any offeree or purchaser or acquirer of the New Shares regarding the legality of an investment in the New Shares by such offeree or purchaser or acquirer under the laws applicable to such offeree or purchaser or acquirer.

Contents

Summary			6
Part 1:		Risk Factors	13
	General		15
		Timetable, Key Offers Information, Application Procedures and Costs of the Offers	16
Part 2:	Letter from the Chairs		18
Part 3:		Key Investment Highlights	20
	3.1	Attraction of Venture Capital Trusts	20
	3.2	The British Smaller Companies VCTs – Investment Highlights	20
	3.3	YFM Private Equity	22
	3.4	Consistent successful track record of realisations	22
	3.5	Strong demand for investment in the UK regions	23
	3.6	Strong historical performance	24
	3.7	Broad and maturing portfolio	25
	3.8	Tax benefits to Investors	27
	3.9	Providing improved liquidity and buy-back policy	27
		3.10 Dividends and Dividend Re-investment Schemes	27
		3.11 Practices and operations	28
		3.12 Committees	28
		3.13 Custody arrangements	29

Part 4:	The Offers
	4.1	Introduction to the Offers	30
	4.2	Investment strategy	30
	4.3	Investment policy	30
	4.4	VCT Regulations	31
	4.5	Co-investment policy	31
	4.6	The Investment Team	31
	4.7	The investment process	33
	4.8	Directors	33
	4.9	Terms of the Offers	35
		4.10 Pricing of the Offers	36
		4.11 Costs of the Offers	39
		4.12 Annual charges	41
		4.13 Conflicts of interest	43
Part 5:		Taxation Considerations	45
Part 6:		Financial Information on the Companies	49
Part 7:		Additional Information on the Companies	58
Part 8:		Definitions	76
Part 9:		Terms and Conditions of the Dividend Re-investment Schemes	80
		Part 10: Terms and Conditions of Application	84
		Manager and Service Providers	88

Summary

Introduction and Warnings

Name and ISIN of Securities	Ordinary shares of 10 pence each in the capital of British Smaller Companies VCT plc ("BSC") (ISIN: GB0001403152) and ordinary shares of 10 pence each in the capital of British Smaller Companies VCT2 plc ("BSC2") (ISIN: GB0005001796) (BSC and BSC2 together the "Companies").
Identity and Contact Details of Issuer	BSC was incorporated and registered in England and Wales on 6 December 1995 as a public company limited by shares under the Companies Act 1985 with registered number 03134749 (LEI: 213800QXD4A9A3GGB469).
	BSC2 was incorporated and registered in England and Wales on 4 October 2000 as a public company limited by shares under the Companies Act 1985 with registered number 04084003 (LEI: 213800846X6PYSUG1328).
	The registered office of the Companies is at 5th Floor, Valiant Building, 14 South Parade, Leeds LS1 5QS and they can be contacted at www.bscfunds.com or by telephone on 0113 261 6478.
Competent Authority approving the Prospectus	The Financial Conduct Authority, 12 Endeavour Square, London EC20 1JN, telephone 020 7066 1000.
Date of Approval of the Prospectus	20 September 2023.
Warnings	This summary should be read as an introduction to the Prospectus.
	Any decision to invest in the securities should be based on a consideration of the Prospectus as a whole by the Investor.
	An Investor could lose all or part of their invested capital.
	Civil liability attaches only to those persons who have tabled this summary, but only where this summary is misleading, inaccurate or inconsistent, when read together with the other parts of the Prospectus, or where it does not provide, when read together with the other parts of the Prospectus, key information in order to aid Investors when considering whether to invest in the New Shares.

Key Information on the Issuers

Who is the Issuer of the Securities?
Domicile and legal form	BSC is domiciled in England and was incorporated and registered in England and Wales on 6 December 1995 as a public company limited by shares under the Companies Act 1985 with registered number 03134749 (LEI: 213800QXD4A9A3GGB469).
	BSC2 is domiciled in England and was incorporated and registered in England and Wales on 4 October 2000 as a public company limited by shares under the Companies Act 1985 with registered number 04084003 (LEI: 213800846X6PYSUG1328).
	The principal legislation under which the Companies operate is the Companies Act 2006 and the regulations made thereunder.
Principal Activities	The Companies' portfolios comprise predominantly established unquoted UK companies. The Companies invest across a broad range of sectors that blends a mix of businesses operating in established and emerging industries that offer opportunities in the application and development of innovation in their products and services.
Major Shareholders	The Companies are not aware of any person or persons who have, or who following the Offers will, or could have, directly or indirectly, voting rights representing 3 per cent or more of the issued share capital of the Companies or who can, or could following the Offers, directly or indirectly exercise control over the Companies. There are no different voting rights for any of the Companies' shareholders.
Directors	The Directors of BSC (all of whom are non-executive) are:
	Rupert Cook (Chair) Adam Bastin Jonathan Cartwright Purvi Sapre
	The Directors of BSC2 (all of whom are non-executive) are:
	Peter Waller (Chair) Barbara Anderson Roger McDowell
Statutory Auditors	The statutory auditor of the Companies is BDO LLP, 55 Baker Street, London W1U 7EU.

What is the key financial information regarding the issuer?				Audited Financial Results for the
	BSC			Year Ended 31 March 2023
	Net assets (£'000)			157,032
	Net asset value per BSC Share (p)			83.7
	Net profit before taxation (£'000)			12,237
	Earnings per BSC Share (p)			6.54
	Dividend per BSC Share (p)			8.5
	Total income before operating expenses (£'000)			1,994
	Performance fee (accrued/paid) (£'000)			125
	Investment management fee (accrued/paid) (£'000)			2,782
	Any other material fees paid to service providers (£'000)			-
	Total return after expenses and taxation (£'000)			12,237
	Total return (p)			258.6
	BSC2	Audited Financial Results for the Year Ended 31 December 2022	Unaudited Financial Results for the 6 months 2023	Unaudited Financial Results for the 6 months Ended 30 June Ended 30 June 2022
	Net assets (£'000)	111,869	133,027	109,636
	Net asset value per BSC2 Share (p)	61.6	57.95	60.3
	Net profit before taxation (£'000)	6,253	253	1,163
	Earnings per BSC2 Share (p)	3.45	0.12	0.64
	Dividend per BSC2 Share (p)	3.0	3.75	1.5
	Total income before operating expenses (£'000)	1,075	720	275
	Performance fee (accrued/paid) (£'000)	635	1,180	363
	Investment management fee (accrued/paid) (£'000)	1,786	1,001	818
	Any other material fees paid to service providers (£'000)	-	-	-
	Total return after expenses and taxation (£'000)	6,253	253	1,163
	Total return (p)	142.6	142.7	139.8
What are the key risks that are specific to the issuer?	Set out below is a summary of the most material risk factors specific to the Companies.
	There can be no guarantee that each Company's investment objective will be achieved or that suitable investment opportunities will be available.
	Investments in unquoted companies, by their nature, involve a higher degree of risk than investment in companies listed on the Official List.
	The current UK economic backdrop, with significantly increased interest rates and high levels of inflation, may result in increased costs and reduced consumer confidence and spending which could have a negative impact on the performance of those companies in the Companies' portfolio of investments that have a greater UK customer bias.
	The Companies' investments may be difficult, and take time, to realise. There may also be constraints imposed on the realisation of investments in order to maintain the tax status of the Companies. These factors may affect the performance of the Companies. The valuation of each Company's

portfolio and opportunities for realisation may also depend on stock market conditions.
The current hostilities in the Ukraine and the resulting sanctions imposed on the Russian Federation by various countries around the world may have unforeseen, long term and far reaching consequences for the global economy and the Companies' portfolio of investments. In particular, the interruption and/or limitation in the supply of certain natural resources (such as oil and gas) could have a negative impact on the performance of the Companies' portfolio businesses.
There can be no guarantee that the Companies will be able to maintain their venture capital trust ("VCT") status. If either Company fails to maintain approval as a VCT before qualifying investors have held their shares for five years, the income tax relief obtained on the amount subscribed in that Company will have to be repaid by such investors. In addition, dividends paid in an accounting period where VCT status is lost will become taxable and a liability to capital gains tax may arise on any subsequent disposal of shares. Where approval by either Company as a VCT is not maintained, that Company will also lose its exemption from capital gains tax.
The VCT rules include a maximum age limit for investments (generally seven years from first commercial sale, or ten years for knowledge intensive companies), and a maximum amount of Risk Finance State Aid which a company can receive over its lifetime (£12 million, or £20 million for knowledge intensive companies). Companies receiving VCT funds are not permitted to use those funds to acquire existing shares, businesses or certain intangible assets. The Finance Act 2018 introduced a new "risk-to capital" condition for VCT qualifying investments, designed to focus investments towards earlier stage, growing businesses, and away from investments which could be regarded as lower risk. The Companies may not make any prohibited non-qualifying investments, including those which breach the "risk-to-capital" condition, and the potential penalty for contravention of these rules can include loss of VCT status with a resultant clawback of VCT tax reliefs from investors. Due to HM Revenue & Custom's financial health requirement, VCTs may not be able to follow on investments in portfolio companies which are more than seven years old (or ten years if knowledge intensive companies) and if their accumulated
losses exceed half of the subscribed share capital. This may mean that there are fewer opportunities for investment and that the Companies may not be able to provide further investment funds for companies already in their portfolios. Breach of any of these conditions could result in the loss of VCT status by the Companies.
VCT status will be withdrawn if a dividend is paid (or other forms of distribution or payments are made to investors) from capital within three years of the end of the accounting period in which shares were issued to investors. This may reduce the amount of distributable reserves available to the Companies to fund dividends and share buybacks.

Key Information on the Securities

What are the main features of the securities?
Type, class and ISIN of securities	BSC will issue new ordinary shares of 10 pence each under the Offers (ISIN: GB0001403152) and BSC2 will issue new ordinary shares of 10 pence each under the Offers (ISIN: GB0005001796) ("New Shares").
Currency, par value and number to be issued	The currency of the New Shares is Sterling. The New Shares to be issued by the Companies are ordinary shares of 10 pence each. The Companies will issue up to £65 million of New Shares, in aggregate, with an over allotment facility for up to a further £25 million of New Shares, in aggregate.

Rights attaching to the securities	As Regards Income:
	The holders of the Shares as a class shall be entitled to receive such dividends as the Directors resolve to pay.
	As Regards Capital:
	On a return of capital on a winding up or on a return of capital (other than on a purchase by the Companies of their own shares) the surplus capital and assets shall be divided amongst the holders of Shares pro rata according to the nominal capital paid up on their respective holdings of Shares.
	As Regards Voting and General Meetings:
	Subject to disenfranchisement in the event of non-compliance with a statutory notice requiring disclosure as to beneficial ownership, each holder of Shares present in person or by proxy shall on a poll have one vote for each Share of which he is the holder.
	As Regards Redemption:
	The Shares are not redeemable.
Seniority of securities	The Shares that are the subject of the Offers will rank equally with the existing Shares in the event of an insolvency of the Companies.
Restrictions on the free transferability of the securities	There are no restrictions on the free transferability of the Shares.
Dividend policy	A venture capital trust must distribute by way of dividend such amount as to ensure that it retains not more than 15 per cent of its income from shares and securities in any one financial year. The Companies remain committed to the objective, over time, of paying tax free dividends from realised investment returns. This depends upon the level of investment income and realisations that the Companies are able to make or achieve in any one period and cannot be guaranteed.
Where will the securities be traded?	Applications have been made to the FCA for the New Shares issued pursuant to the Offers to be admitted to the premium segment of the Official List and will be made to the London Stock Exchange for the New Shares issued pursuant to the Offers to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that each such admission will become effective, and that dealings in those New Shares will commence, within ten business days of their allotment.
What are the key risks that are specific to the securities?	Set out below is a summary of the most material risk factors specific to the Shares
	The market price of the New Shares may not fully reflect their underlying net asset value. The value of an investment in the Companies, and the income derived from it, may go down as well as up. Venture capital trusts exist to address a market failure, providing funding where the risk profile of returns is not sufficient for there to be active market participants; an Investor may not get back the full amount invested, even taking into account the available tax reliefs.
	Although the existing Shares have been (and it is anticipated that the New Shares will be) admitted to the Official List and are (or will be) traded on the London Stock Exchange's market for listed securities, the secondary market for VCT shares is generally illiquid.
	The disposal of New Shares within five years of their issue will result in some or all of the 30 per cent income tax relief available on investment becoming repayable.
	The Companies will only pay dividends on their Shares to the extent that they have distributable reserves and cash available for that purpose. A reduction in income received, or in capital gains realised, from the Companies' investments may adversely affect the dividends payable to Shareholders.

Key Information on the Offer of Securities to the Public and/or Admission to Trading on a Regulated Market

Under which conditions and timetable	Details of the Offer and Admission to Trading
can I invest in this security?	Up to £65 million of New Shares are being made available under the Offers, in aggregate, with an over-allotment facility for up to a further £25 million of New Shares, in aggregate. The maximum number of New Shares that may be issued under the Offers by BSC and BSC2 is 80,000,000 and 100,000,000 New Shares respectively and the maximum gross proceeds that either BSC or BSC2 can raise under the Offers is £75,000,000. The New Shares are payable by an applicant in full upon application. The Offers will close on 5 April 2024, or earlier if fully subscribed. The directors of the Companies reserve the right to close the Offers in respect of either Company earlier and to accept applications and issue New Shares at any time following the receipt of valid applications. Applications have been made to the FCA for the Shares issued pursuant to the Offers to be admitted to the premium segment of the Official List and will be made to the London Stock Exchange for the New Shares issued pursuant to the Offers to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that such admission will become effective and that trading will commence in respect of the New Shares within ten business days of their allotment.
		Pricing of the Offers
	The number of New Shares to be allotted under an Offer will be determined by the following formula:
	A – B – C – D + E
	NAV per Share	where:
	A	is the subscription accepted under an Offer ("Offer Amount"), including a pro-rata share between the Companies of any adviser charge that is facilitated by the Companies ("Facilitated Fee");
	B	is the pro-rata share between the Companies of any Facilitated Fee (up to 4.5 per cent of the Offer Amount);
	C	is the initial application fee of 3.0 per cent of the Offer Amount (3.5 per cent of the Offer Amount for applications received from applicants who have not invested their money through a financial intermediary/adviser and have invested directly into the Companies);
	D	where applicable, is initial commission of 2.0 per cent of the Offer Amount payable to an execution only broker or platform or an intermediary of a professional investor;
	E	where applicable, is the amount of initial commission waived by an execution-only broker or platform (up to a maximum of 2.0 per cent of the Offer Amount); and
	NAV per Share	is the most recently published net asset value per Share of the relevant Company, adjusted for any subsequent dividends paid or declared (and in respect of which no adjustment has been made to that latest published NAV per Share).

	Applicants whose applications are accepted and contribute cleared funds to the first £20 million of subscriptions accepted under the Offers will receive additional New Shares equivalent to 0.25 per cent of their respective Offer Amounts. Applicants whose applications are accepted and contribute cleared funds to the next £10 million of subscriptions accepted under the Offers will receive additional New Shares equivalent to 0.125 per cent of their respective Offer Amounts. These additional New Shares will be paid for by YFM Private Equity Limited, the Companies' investment manager.
	To the extent possible, applicants will receive additional New Shares equivalent to receiving a 3.70 per cent per annum return on funds awaiting allotment, calculated by reference to the number of days between the acceptance of an application (including full receipt of cleared funds) and the date of allotment. This rate is subject to change.
	Each of the Boards may close the Offers in respect of its Company at any time and reserve the right to accept an application form and to allot and arrange the listing of New Shares in respect of applications received on or prior to the closing date of the Offers as they see fit.
	Dilution
	The existing issued BSC Shares will represent 79.1 per cent of the enlarged ordinary share capital of BSC immediately following the Offers, assuming the Offers are fully subscribed in both Companies, including the over-allotment facility, with subscriptions split as to 60 per cent/40 per cent as between BSC and BSC2 respectively at an Offer Price for BSC of 84.227p, and on that basis BSC shareholders who do not subscribe under the Offers will, therefore, be diluted by 20.9 per cent.
	The existing issued BSC2 Shares will represent 78.8 per cent of the enlarged ordinary share capital of BSC2 immediately following the Offers, assuming the Offers are fully subscribed in both Companies, including the over-allotment facility, with subscriptions split 60 per cent/40 per cent as between BSC and BSC2 respectively at an Offer Price for BSC2 of 58.196p, and on that basis BSC2 shareholders who do not subscribe under the Offers will, therefore, be diluted by 21.2 per cent.
Why is this prospectus being produced?	Each Company is a tax efficient listed company which aims to achieve long-term investment returns for private investors. Funds raised under the Offers will be utilised by each Company in accordance with its published investment policy, to maintain liquidity and to enable payment of costs without reducing the overall amounts currently available for investment. The Companies co-invest with each other and other funds managed by YFM Private Equity Limited, the Companies' Manager.
	The net aggregate proceeds of the Offers, assuming a £90,000,000 subscription (with the over-allotment facility fully utilised) and the maximum initial charge, will be £86,850,000. On these assumptions and assuming a split of subscription monies as to 60 per cent to BSC and 40 per cent to BSC2, the net proceeds will be £52,110,000 and £34,740,000 for BSC and BSC2 respectively.
	The Offers are not subject to an underwriting agreement.
	No conflict of interest is material to the Offers.

Part 1 Risk Factors

Prospective investors should carefully consider the following risk factors in addition to the other information presented in this document. If any of the risks described below were to occur, it could have a material effect on either of the Companies' business, financial condition or results of operations. The risks and uncertainties described below are the only known material risks which the Companies or their Shareholders will face. Further risks, unknown by the Companies, may exist. Any decision to invest under the Offers should be based on consideration of this document as a whole.

Risk factors relating to the Shares

The market price of the New Shares may not fully reflect their underlying Net Asset Value. The value of an investment in the Companies, and the income derived from it, may go down as well as up. VCTs exist to address a market failure, providing funding where the risk profile of returns is not sufficient for there to be active market participants; an Investor may not get back the full amount invested, even taking into account the available tax reliefs.

Although the existing Shares have been (and it is anticipated that the New Shares will be) admitted to the Official List and are (or will be) traded on the London Stock Exchange's market for listed securities, the secondary market for VCT shares is generally illiquid. Therefore, there may not be a liquid market for the Shares, which may be partly attributable to the fact that the initial income tax relief is not available for VCT shares generally bought in the secondary market and because VCT shares usually trade at a discount to their net asset value, the price of the Shares may be volatile and Shareholders may find it difficult to realise their investment. An investment in the Companies should, therefore, be considered as a long-term investment.

The disposal of New Shares within five years of their issue will result in some or all of the 30 per cent income tax relief available on investment becoming repayable. On this basis, investing in New Shares should be considered a long-term investment. The availability of income tax relief on an application for shares issued in a VCT is restricted where the application is "linked" to a sale of shares in the same VCT or another VCT which is known to be merging with that VCT. For these purposes, linked means i) the sale of shares in the VCT was conditional on the application for shares in the same VCT (or vice versa) or ii) the application and sale are within six months of each other (irrespective of which comes first). If the application is "linked", the amount on which the upfront income tax relief can be claimed will be reduced by the amount of consideration of any linked revenue. In addition, if a VCT makes a payment to its shareholders which amounts to a repayment of share capital (including the payment of a dividend or a distribution), other than for the purpose of redeeming or repurchasing such shares, before the end of the third accounting period following the accounting period in which the shares were issued, the VCT status of the VCT will be withdrawn.

The Companies will only pay dividends on their Shares to the extent that they have distributable reserves and cash available for that purpose. A reduction in income received, or in capital gains realised, from the Companies' investments may adversely affect the dividends payable to Shareholders.

The tax rules, or their interpretation, in relation to an investment in Shares and/or the rates of tax may change during the life of the Companies and may apply retrospectively, which may adversely affect the performance of the Companies.

Risk factors relating to the Companies

There can be no guarantee that each Company's investment objective will be achieved or that suitable investment opportunities will be available.

An investment in unquoted companies, by its nature, involves a higher degree of risk than investment in companies traded on the main market for listed securities of the London Stock Exchange. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals.

The current UK economic backdrop, with significantly increased interest rates and high levels of inflation, may result in increased costs and reduced consumer confidence and spending which could have a negative impact on the performance of those companies in the Companies' portfolio of investments that have a greater UK customer bias.

The Companies' investments may be difficult to realise. There may also be constraints imposed on the realisation of investments in order to maintain the tax status of the Companies. The market for stock in smaller companies is less liquid than for stock in larger companies, bringing with it potential difficulties in acquiring and valuing such stock. The lack of liquidity will also give rise to difficulties in disposing or realising of investments at market value should there be a need to realise within a short term. The valuation of each Company's portfolio and opportunities for realisation may also depend on stock market conditions.

The current hostilities in the Ukraine and the resulting sanctions imposed on the Russian Federation by various countries around the world may have unforeseen, long term and far reaching consequences for the global economy and the Companies' portfolio of investments. In particular, the interruption and/or limitation in the supply of certain natural resources (such as oil and gas) could have a negative impact on the performance of the Companies' portfolio businesses.

The Companies intend to manage their affairs in respect of each accounting period so as to obtain and thereafter maintain approval as a VCT. However, there can be no guarantee that the Companies will be able to maintain their VCT status. If either Company fails to maintain approval as a VCT before Qualifying Investors have held their Shares for five years, the income tax relief obtained on the amount subscribed in that Company will have to be repaid by such Investors. In addition, dividends paid in an accounting period where VCT status is lost will become taxable and a liability to capital gains tax may arise on any subsequent disposal of Shares. Where approval by either Company as a VCT is not maintained, that Company will also lose its exemption from capital gains tax. If at any time VCT status is lost by either Company, Dealings in the Shares will normally be suspended until such time as that Company has published proposals either to continue as a VCT or to be wound up.

Investors should be aware that since 18 November 2015 there is a maximum age limit for companies receiving investments from VCTs (generally seven years from first commercial sale or ten years for Knowledge Intensive Companies), and a maximum amount of Risk Finance State Aid which a company can receive over its lifetime (£12 million, or £20 million for Knowledge Intensive Companies). Companies receiving VCT funds are not permitted to use those funds to acquire existing shares, businesses or certain intangible assets. The Finance Act 2018 introduced a new "risk-to-capital" condition for Qualifying Investments, designed to focus investments towards earlier stage, growing businesses, and away from investments which could be regarded as lower risk. The Companies may not make any prohibited non-Qualifying Investments, including those which breach the "risk-to-capital" condition, and the potential penalty for contravention of these rules can include loss of VCT status with a resultant clawback of VCT tax reliefs from investors. Due to HMRC's financial health requirement, VCTs may not be able to follow on investments in portfolio companies which are more than seven years old (or ten years if Knowledge Intensive Companies) and if their accumulated losses exceed half of the subscribed share capital. This may mean that there are fewer opportunities for investment, and that the Companies may not necessarily be able to provide further investment funds for companies already in their portfolios. From 6 April 2016, a VCT can only invest in Qualifying Holdings or in certain specified liquid assets.

VCT status will be withdrawn if a dividend is paid (or other forms of distribution or payments are made to investors) from capital within three years of the end of the accounting period in which shares were issued to investors. This may reduce the amount of distributable reserves available to the Companies to fund dividends and share buybacks.

Any change of governmental, economic, fiscal, monetary, or political policies, or in particular current government spending reviews and cuts, could materially affect, directly or indirectly, the operation of the Companies and/or their portfolio of companies in which they invest and the value of and returns from securities and/or their ability to achieve or maintain VCT status. Changes in legislation concerning VCTs, in particular in relation to Qualifying Holdings and qualifying trades, may limit the number of Qualifying Investment opportunities, reduce the level of returns which would otherwise have been achievable, increase the risk profile of future investments or result in the Companies not being able to meet their objectives.

The impact of the UK's withdrawal from the EU, and the ending of the transition period on 31 December 2020 has modified the overall trading environment for the Companies' portfolio businesses, with many continuing to adapt to the changing regulatory and trading environment; any adverse impact may affect investor returns.

Full information for determining the value or the risks to which unquoted companies are exposed may also not be available.

The past performance of the Companies or other funds managed or advised by the Manager is not a reliable indicator of the future performance of the Companies. The value of the Shares depends on the performance of the Companies' underlying assets.

The information in this document is based on existing legislation, including taxation legislation. The tax reliefs described are those currently available. The tax rules, or their interpretation in relation to an investment in the Companies and/or rates of tax, may change during the life of the Companies and can be retrospective. The value of tax reliefs depends on the personal circumstances of the Investor, who should consult their own tax advisers before making an investment.

In 2015 a sunset clause for VCT income tax relief was introduced. This provides that income tax relief will no longer be given to subscriptions made on or after 6 April 2025, unless the legislation is renewed by an HM Treasury order. The Government has announced that they plan for the sunset clause to be extended beyond 2025, but no further details have been given. The Companies are monitoring this risk and the potential impact on the Companies.

General

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements, including, without limitation, statements containing the words "targets", "believes", "expects", "estimates", "intends", "may", "plan", "will", "anticipates" and similar expressions (including the negative of those expressions). The Directors consider that the expectations reflected in these statements are reasonable but forward-looking statements involve unknown risks, uncertainties and other factors which may cause the actual results, financial condition, performance or achievements of the Companies, or industry results, to be materially different from any future results, performance or achievements expressed or implied by those forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the risk factors section of this document. Given these uncertainties, prospective investors are cautioned not to place any undue reliance on those forward-looking statements. The forward-looking statements contained in this document are made on the date of this document, and the Companies are not under any obligation to update those forward-looking statements in this document to reflect actual future events or developments. Notwithstanding the foregoing, nothing in this Prospectus shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation. These statements will be updated as and when required by the Prospectus Regulation Rules, the Listing Rules and the Disclosure Guidance & Transparency Rules.

GOVERNING LAW

Unless otherwise stated, statements made in this Prospectus are based on the law and practice currently in force in England and Wales.

NON-MAINSTREAM POOLED INVESTMENT STATUS AND UK MIFID LAWS

As the Companies are closed-ended investment companies, the Shares will be "excluded securities" under the FCA's rules on non-mainstream pooled investments. Accordingly, the promotion of the Shares is not subject to the FCA's restriction on the promotion of non-mainstream pooled investments. The Companies intend to conduct their affairs so that their Shares can be recommended by financial advisers to retail investors in accordance with the rules on the distribution of financial instruments under the UK MiFID Laws. The Directors consider that the Shares should be considered "non-complex" for the purposes of the UK MiFID Laws.

WEBSITES

Without limitation, neither the contents of the Companies' or the Manager's website (or any other website referred to in this Prospectus) nor the content of any website accessible from hyperlinks on the Companies' or the Manager's website (or any other website referred to in this Prospectus) is incorporated into, or forms part of this Prospectus.

WITHDRAWAL

The Companies may update the information provided in this Prospectus by means of a supplementary prospectus if a significant new factor that may affect the evaluation by prospective investors occurs after the publication of this Prospectus or if this Prospectus contains any material mistake or substantial inaccuracy. Any such supplementary prospectus will be subject to approval by the FCA and will be made public in accordance with the Prospectus Regulation Rules. In the event that the Companies are required to publish a supplementary prospectus prior to Admission, Applicants who have applied for Shares under the Offers shall have the right to withdraw their Applications for Shares made prior to the publication of the supplementary prospectus. Such withdrawal must be made within the time limits and in the manner set out in any such supplementary prospectus (which shall be at least two clear Business Days following the publication of the relevant supplementary prospectus). If the Application is not withdrawn within the stipulated period, any offer to apply for Shares under the Offers will remain valid and binding. Applicants who have applied for Shares via an Intermediary should contact the relevant Intermediary for details of how to withdraw an Application.

Timetable, Key Offers Information, Application Procedures and Costs of the Offers

Timetable

Offers open	20 September 2023 27 September 2023 Close of business on 28 March 2024
Applications processed
Deadline for receipt of Application Forms and cleared funds*
Closing of the Offers*	On or before 5 April 2024
First allotment of up to £30,000,000*	After 1 January 2024 and on or before 31 January 2024
Second and final allotment*	After 28 March 2024 and on or before 5 April 2024
Allotment letters and tax certificates issued by email or post	Within 3 Business Days following allotment
Share certificates (where applicable) issued by post	Within 10 Business Days following allotment
Financial Intermediary payments issued by BACS	Within 5 Business Days following allotment
Dealings commence	Within 10 Business Days following allotment

* Each of the Boards may close the Offers to further Applications in respect of its Company earlier than the date stated above if it is fully subscribed by an earlier date. The Boards further reserve the right to accept valid Application Forms and to allot and arrange for the listing of New Shares in respect of Applications received at any times prior to the closing date of the Offers as the Boards see fit.

Key Offers Information

The estimated maximum number of New Shares to be allotted in the Offers is as follows*:

	BSC	BSC2
Maximum amount raised	£54,000,000	£36,000,000
Offer Price	84.227p	58.196p
Maximum number of New Shares to be allotted	64,112,607	61,860,053

* Assuming a NAV per Share for BSC and BSC2 of 81.7p and 56.45p respectively, that the Offers are fully subscribed, including the over-allotment facility, an allocation of 60 per cent to BSC and 40 per cent to BSC2 and that all Applications are made through a Financial Adviser without a Facilitated Fee and do not benefit from an Initial Application Fee discount.

Costs of the Offers

The number of New Shares allotted in respect of the Offers will be calculated on the basis of the "Pricing Formula" as set out on page 36.

Minimum individual Application under the Offers (including any Facilitated Fee)	£6,000
Initial Application Fee*	3 per cent
Initial commission payable to execution only platforms or brokers	2 per cent
Aggregate net proceeds of the Offers**	£85,500,000

* 3.5 per cent for Application Forms received directly from Applicants.

** Assuming that the Offers are fully subscribed, including the over-allotment facility, that all Applications, which do not benefit from an Initial Application Fee discount, are made through execution-only platforms or brokers and that no initial commission is waived.

Applicants whose Applications are accepted and contribute cleared funds to the first £20 million of subscriptions accepted under the Offers will receive additional New Shares equivalent to 0.25 per cent of their respective Offer Amounts. Applicants whose Applications are accepted and contribute cleared funds to the next £10 million of subscriptions accepted under the Offers will receive additional New Shares equivalent to 0.125 per cent of their respective Offer Amounts. These additional New Shares will be paid for by YFM Private Equity Limited, the Companies' Manager.

To the extent possible, Applicants will receive additional New Shares equivalent to receiving a 3.70 per cent per annum rate of return on funds awaiting allotment, calculated by reference to the number of days between the acceptance of an Application (including full receipt of cleared funds) and the date of allotment. This rates is subject to change.

Application Procedures

The terms and conditions of an Application under the Offers are set out in Part 10 of this document. The Application Form, together with notes on how to complete an Application Form, can be found on the Companies' website. Applications under the Offers will be accepted on a "first-come, first-served" basis, subject always to the discretion of the relevant Board. For these purposes, "first-come, first served" shall be assessed based on the date and time of receipt of a fully completed Application, subject to receipt of Application monies (in full) in cleared funds by the earlier of an Offer deadline or within five Business Days from receipt of Application to retain the Applicant's position of priority. If Application monies are not received within such time, the relevant date and time shall be when the Applicant's Application monies are received in cleared funds. An Application may not be considered as "complete" until identity verification is completed and/or, where relevant, information or supporting evidence required for the Application is no longer outstanding.

Part 2 Letter from the Chairs

Rupert Cook (Chair) Valiant Building Adam Bastin 14 South Parade Jonathan Cartwright Leeds Purvi Sapre LS1 5QS

Peter Waller (Chair) Valiant Building Barbara Anderson 14 South Parade Roger McDowell Leeds

Directors: Registered Office:

BSC 5th Floor

BSC2 5th Floor LS1 5QS

20 September 2023

Dear Shareholder/Investor

We are delighted to announce and invite you to subscribe in the new Offers for BSC and BSC2.

The Companies are raising up to £65 million with an over-allotment facility to raise in aggregate up to a further £25 million. The Boards may use the over-allotment facility in whole or in part at any time in the duration of the Offers depending on investor appetite and anticipated investment deployment.

The last fundraise proved popular with investors raising gross proceeds of £75 million in aggregate.

The Companies focus on investing in businesses that are at an early stage of their development and which are seeking capital to execute on their growth and expansion plans.

Through the pandemic, and despite an increasingly challenging macro environment, with high levels of inflation accompanied by rising interest rates, the Companies' portfolio businesses have, in general, shown resilience in their trading and growth. In the 30 month period from 31 December 2020 to 30 June 2023, the Companies have generated Total Return increases of 37.5 per cent (BSC) and 32.2 per cent (BSC2) versus their respective opening net asset values. During the same period the FTSE Small Cap fell by 2.0 per cent.

Demand for growth capital continues, as evidenced by investments totalling £63.4 million made in the c.21 months from 1 January 2022 to the date of this document, of which £22.9 million has been invested in 2023. Through the fundraising the Companies will seek to improve capacity to broaden the portfolio and provide further funding for existing investee companies to accelerate their growth plans.

The Companies are seeking to raise, in aggregate, up to £90 million before expenses with an initial offer of £65 million which can be extended by up to £25 million through an over-allotment facility at the discretion of each of the Boards. The maximum number of New Shares that may be issued under the Offers by BSC and BSC2 is 80,000,000 and 100,000,000 New Shares respectively and the maximum gross proceeds that either BSC or BSC2 can raise under the Offers is £75,000,000. The funds raised under the Offers will be utilised by each Company in accordance with its investment policy, to maintain liquidity, enable the Companies to buy back shares for Shareholders who wish to sell, seeking to deliver attractive returns for shareholders, including the payment of dividends over the medium term and to enable payment of costs.

Amounts subscribed by Investors under the Offers will be used to purchase New Shares and will enable them to participate in the investment returns of the Companies' investment portfolios following the allotment of the New Shares.

Assuming 64,112,607 New Shares are issued by BSC at an illustrative Offer Price of 84.227p (as set out on page 37) and assuming 61,860,053 New Shares are issued by BSC2 at an illustrative Offer Price of 58.196p (as set out on page 37), the New Shares will comprise approximately 26.5 per cent and 27.0 per cent of the current Shares in issue of BSC and BSC2 respectively.

Please note that only Application Forms completed online or returned by post/hand/email to the Receiving Agent will be accepted. The minimum individual subscription in aggregate has been set at £6,000 (including any Facilitated Fee).

Should you wish to participate in the new Offers, we would encourage you to do so online and by bank transfer. By doing so, you not only reduce the Offers' carbon footprint but expedite the processing time of your Application and payment.

Potential Investors should consult their professional or Financial Advisers before deciding whether and, if so, how much they should invest under the Offers. Should you have any administrative questions concerning the application procedures please contact the Receiving Agent on 01484 240 910 (Monday to Friday excluding public holidays, 9.00 am - 5.30 pm) or at bscfunds@city.uk.com. No investment, financial or tax advice can be given by YFM or the Receiving Agent. If you are in any doubt, you should consult your independent Financial Adviser.

Please note that YFM, RAM Capital and City act only for the Companies and not for any Investor under the Offers and will not be responsible to the Investors for providing the protections afforded to their clients.

We very much look forward to welcoming participation from you and thank you for your continued support.

Yours faithfully

Rupert Cook Peter Waller Chair Chair British Smaller Companies VCT plc British Smaller Companies VCT2 plc

Part 3 Key Investment Highlights

3.1 Attraction of Venture Capital Trusts

The Venture Capital Trust market has evolved over recent years, with a combination of factors contributing to the increase in its attractiveness:

• As the size of some Venture Capital Trusts has become larger, their investment portfolios have become more diversified and mature, helping to mitigate the overall level of risk.

• The increased scale of the larger Venture Capital Trusts has helped reduce the annual running costs per share of those funds.

• Access to a portfolio of higher risk, unquoted growth-orientated investments that:

  • Have achieved long-term growth;
  • Benefit from an initial 30 per cent income tax rebate;
  • Benefit from a tax-free dividend yield;
  • Benefit from tax free gains on disposal;
  • Give a return of capital (subject to liquidity and regulation).

• Investments of up to £200,000 per annum are allowed with no lifetime limit.

Note: The above benefits assume that an Investor and the Venture Capital Trusts qualify for all applicable tax reliefs.

3.2 The British Smaller Companies VCTs - Investment Highlights Increasing total returns1

• The BSC VCTS are the most consistent performers in respect of net asset value plus cumulative dividends paid ("NAV Total Return") of all generalist VCTs that have a 10 year track record.

• BSC is 1st and BSC2 is 2nd, as per AIC data published on 31 August 2023 based on the Companies' results to 31 March 2023.

			NAV Total Return %
	Company	Average Rank Position	1yr	3yr	5yr	10yr
1	BSC	4.8	3.93	61.61	68.00	139.51
2	BSC2	6.8	4.41	60.38	61.94	101.68
3	Albion Enterprise VCT	7.0	5.89	37.48	51.58	132.54
4	Mobeus Income & Growth VCT	7.0	-2.71	58.24	81.28	151.16
5	Albion Development VCT	7.4	4.64	37.49	50.16	126.09
6	The Income & Growth VCT	8.4	-1.93	51.31	76.12	144.43
7	Crown Place VCT	8.8	5.49	32.62	47.64	122.61
8	Mobeus Income & Growth VCT	8.8	-10.74	45.99	76.40	172.42
9	Octopus Apollo VCT	9.6	8.56	46.36	50.23	70.59
	10 Foresight VCT	10.8	3.48	53.16	48.01	65.44

1 Source: VCT Generalist NAV Total Return index compiled from Morningstar by the AIC as at 31 August 2023 – total return percentage over the period in question, assuming reinvested dividends

The graphs below reflect the Companies' most recent published financial information to 30 June 2023.

Annualised rate of return over 10, 5, 3, 2 and 1 year periods to 30 June 2023

BSC2

Excluding all tax reliefs

• BSC and BSC2 competitive ongoing costs.

  • The ongoing costs for BSC, for the year ended 31 March 2023, were 2.1 per cent of the average NAV and for BSC2, for the year ended 31 December 2022, were 2.1 per cent of the average NAV.

• Companies' long track record.

  • The last 35 investments in unquoted companies realised by the Companies to 30 June 2023 generated on average a total return of 2.2x cost.

• Strong demand for investment which maps YFM's strong regional footprint.

  • The Companies have made investments totalling £63.4 million in the c.21 months from 1 January 2022 to the date of this document, of which £22.9 million has been invested in 2023.

• Broad portfolio of investments.

  • 41 investments at 30 June 2023, with 67 per cent of the combined portfolio valuation being held for more than three years.
  • Investments held across a broad range of sectors, with Data accounting for 26 per cent of the combined portfolio value at 30 June 2023, Application Software 20 per cent and Tech-enabled Services a further 17 per cent.
  • Average holding period of the investment portfolio is approximately 6.0 years.

• Dividend Re-investment Scheme and Share buy-back programme.

3.3 YFM Private Equity

YFM has been investing in growing businesses for over 40 years and has been managing Venture Capital Trusts since 1996. YFM currently manages eight funds, which it is managing under delegation. On behalf of the Companies, YFM will be pursuing an active investment strategy. Since 30 September 2013 YFM has been owned by its management team and led by David Hall who has been responsible for YFM as Manager or investment adviser of the Companies since 2003. YFM benefits from:

• Highly experienced and one of the UK's largest VCT Investment Teams 33 investment and portfolio staff spread across YFM's five regional offices with an average of 12 years' experience each, whose combined experience aligns with the published investment policy of the Companies.

• Experienced board and management team with significant experience in investment management throughout their careers, further broadened and strengthened in 2023 in line with YFM's continued growth.

• Strong levels of deal flow in the UK regions selectively choosing from around 550 investment opportunities each year generated by YFM's regional office network and strong ties with the local corporate finance community.

• Active portfolio management through a combination of YFM involvement and non-executive director board representation, YFM is actively involved in setting strategy, strengthening management teams, improving management performance, evaluating acquisitions and driving exit values.

3.4 Consistent successful track record of realisations

The last 35 investments in unquoted companies realised by the Companies to 30 June 2023 generated on average a total return of 2.2x cost.

3.5 Strong demand for investment in the UK regions

The map below shows the geographical diversification of the investment portfolio as at 30 June 2023.

3.6 Strong historical performance

Dividend yield per annum

The table below sets out the dividend yield* for the three years and five years to 30 June 2023.

	3 years	5 years
BSC	10.6%	8.9%
BSC2	11.2%	9.4%

* Dividend yield is the average dividends in the period as a % of the opening Net Asset Value

Total Return by offer

Since December 2005, BSC and BSC2 have operated a common investment strategy. The returns (from the subsequent offers) for each Company for the last ten years are set out in the graphs below.

IRR is the unaudited annual rate of return that equates the cost at the date of the original investment, with the value of subsequent dividends plus the 30 June 2023 Net Asset Value per Share. This excludes the benefit of any initial tax relief.

The past performance of the Manager, the funds it manages, and the Companies may not be repeated and is not a guide to the future performance of the Companies and no projection is implied or should be inferred.

3.7 Broad and maturing portfolio

The Companies invest across a range of sectors, with the analysis as at 30 June 2023 set out in the tables below.

All investments

Sector		% of venture capital investments
	BSC	by value BSC2	Combined
Data	24	28	26
Application Software	21	20	20
Tech-enabled Services	17	17	17
New Media	13	12	12
Business Services	12	10	11
Cloud & DevOps	8	8	8
Retail & Brands	4	4	4
Advanced Manufacturing / Other	1	1	2
Total	100	100	100

As at 30 June 2023, the average holding period for the last 35 unquoted investments realised by the Companies was 7.3 years. Holding periods vary from investment to investment, but the determining factor is based on maximising the return from each investment. The table below sets out the age profile of the combined portfolio of investments by value. As at 30 June 2023, the average holding period of the investment portfolio is approximately 6.0 years.

	% of venture capital investments by value of venture capital investments
	< 1 year	1-3 years	3-5 years	5+ years	Total
Combined	13%	20%	26%	41%	100%

The investment portfolios as at 30 June 2023 are summarised below (all in £'000):

			BSC		BSC2		Combined
Investee company (All in £000)	Sector	Carrying cost*	Valuation	Carrying cost*	Valuation	Carrying cost*	Valuation	Cumulative % of net assets by value
Unquoted Investments
Matillion Limited	Data	1,778	24,886	1,456	21,022	3,234	45,908	13.7
Unbiased EC1 Limited Tech-enabled Services		5,596	10,511	3,731	7,008	9,327	17,519	19.0
Outpost VFX Limited	New Media	4,500	8,680	3,000	5,786	7,500	14,466	23.3
Displayplan Holdings Limited	Business Services	130	8,829	70	4,754	200	13,583	27.3
Wooshii Limited	New Media	4,644	6,981	3,096	4,654	7,740	11,635	30.8
Elucidat Ltd	Application Software	3,960	6,226	2,640	4,151	6,600	10,377	33.9
Force24 Ltd	Application Software	3,150	4,758	2,100	3,172	5,250	7,930	36.3
Vypr Validation Technologies Limited	Tech-enabled Services	3,300	4,159	2,200	2,772	5,500	6,931	38.4
ACC Aviation Group Limited	Business Services	220	4,095	145	2,741	365	6,836	40.4
Quality Clouds Limited Cloud & DevOps		3,916	4,032	2,610	2,688	6,526	6,720	42.4
Largest 10 unquoted venture capital investments		31,194	83,157	21,048	58,748		52,242 141,905	42.4
Other unquoted venture capital investments		43,190	42,693	33,454	30,426	76,644	73,119	64.3
Total unquoted venture capital investments			74,384 125,850	54,502		89,174 128,886 215,024		64.3
Listed investment funds		4,476	3,745	1,999	1,746	6,475	5,491	65.9
Total investments			78,860 129,595	56,501		90,920 135,361 220,515		65.9
Cash and cash equivalents		69,854	69,854	41,884		41,884 111,738	111,738	99.3
Other assets		1,993	1,993	223	223	2,216	2,216	100.0
Net assets			150,707 201,442			98,608 133,027 249,315 334,469		100.0

* Carrying cost is original cost less repayments and the cost of part realisations

3.8 Tax benefits to Investors

The principal tax reliefs, which are available on a maximum annual subscription of £200,000, are set out below:

• 30 per cent income tax relief on your investment (subject to a minimum five year period of retention and also your total income tax bill);

• Tax free dividends and capital distributions;

• Exemption from capital gains tax on any capital profit on disposal of shares.

The table below has been prepared for illustrative purposes only and does not form part of the summary of the tax reliefs contained in this section. The table shows how the initial tax reliefs available can reduce the effective cost of an investment of £10,000 in a VCT by a Qualifying Investor subscribing for VCT shares to only £7,000:

	Effective Cost	Tax Relief
Investor unable to claim any tax reliefs	£10,000	Nil
Qualifying Investor able to claim tax reliefs	£7,000	£3,000

This is only a brief summary of the current UK tax position of Venture Capital Trust investors. Further details are provided in Part 5. Investors are recommended to consult with their independent Financial Adviser as to the taxation consequences of their investment in a Venture Capital Trust. In addition, the availability of tax reliefs depends on the Companies maintaining their Venture Capital Trust qualifying status.

3.9 Providing improved liquidity and buy-back policy

Both of the Companies want to create some liquidity in the secondary market for their Shares and to facilitate this they operate an active Share buy-back policy whereby Shares are bought back by the Companies at a discount to Net Asset Value. This policy and the rate of discount applied to Shares bought back are regularly reviewed. The current discount rate applied by both Companies is targeted to be no more than 5 per cent.

3.10 Dividends and Dividend Re-investment Schemes

A VCT must distribute by way of dividend such amount as to ensure that it retains not more than 15 per cent of its income from shares and securities in any one financial year. The Directors of each of the Companies aim to pay tax free distributions to Shareholders of income or realised gains.

The Companies currently operate Dividend Re-investment Schemes providing Shareholders with the opportunity to reinvest the cash dividends paid by the Companies through the issue of new Shares. It is expected that the first applicable dividend in relation to which the Schemes will operate for the New Shares will be the first dividend paid after 5 April 2024 by BSC and BSC2 respectively. Shareholders whose New Shares are allotted in the proposed January 2024 allotment may have the opportunity to participate at an earlier date. Currently, Shareholders whose dividends are re-invested under the Schemes receive Shares at the latest reported Net Asset Value as at the date the dividend is paid (adjusted for the relevant dividend if this Net Asset Value does not already recognise the dividend). Whilst the Schemes can be withdrawn at any time, the Directors have no plans to do so.

Shareholders participating in the Schemes should qualify for the Venture Capital Trust tax reliefs that are applicable at the time of investment to subscription for new Shares in the Companies, subject to current law and the limits set out below, provided they hold the Shares for the 5 year Venture Capital Trust qualifying period applicable to new subscriptions. The Shares subscribed through the Schemes will form part of each Shareholder's current annual limit of £200,000 for new subscription in Venture Capital Trusts, as will shares issued under any other VCT's DRIS or equivalent. Dividends paid by either Company are tax-free provided the holding is acquired within this limit and need not be reported in the Shareholder's annual tax return. Any loss or gain accruing to a Shareholder on a disposal of the Shares acquired within the current annual limit of £200,000 will be neither a chargeable gain nor an allowable tax loss for the purposes of capital gains tax. Shares acquired first will be treated as disposed of first, whether or not tax relief was obtained on those Shares.

Shareholders wishing to participate in the Schemes should complete the appropriate box in Section 5 of the Application Form, having read and understood the terms and conditions of the Schemes, which are set out on pages 80 to 83.

The tax consequences of a Shareholder choosing to participate in either Scheme will depend on their personal circumstances and specialist independent tax and financial advice should be obtained before entering the Scheme.

3.11 Practices and operations

Each Board is responsible for the overall control and management of their Company with responsibility for its affairs, including determining its investment policy. Investment proposals are originated by the Manager and formally approved by the relevant Board or, in the case of BSC, its investment committee.

The Manager is responsible for the sourcing and screening of investment opportunities, carrying out due diligence investigations and making submissions to the Boards regarding potential investments. Post investment, the Manager works with the businesses and management teams in which the Companies are invested, monitoring progress, effecting change and where applicable redefining strategies with a view to maximising values through structured exit processes. The majority of new investments are now self-assured on a case-by-case basis and always with confirmation from professional advisors that they are Qualifying Investments. Advance assurance is sought where there is an element of uncertainty over the application of the rules.

Each Board reserves the right to take all investment and divestment decisions except in the making of certain investments up to £250,000 in companies whose shares are to be traded on AIM and where the decision is required urgently, in which case the Chair, or, in the case of BSC, the Chair of the BSC investment committee if appropriate, may act in consultation with the Manager, albeit the Companies do not currently hold any investments in companies whose shares are traded on AIM and have no intention of making such investments at the current time.

The BSC Investment Committee is authorised to make investment decisions (including new investment, further investment, variation and realisation decisions) on behalf of the BSC Board. The Manager is authorised to approve follow-on investment decisions of up to £1,000,000 (on a combined BSC / BSC2 basis) for wellperforming investments.

Each Board meets regularly throughout the year (normally at least quarterly), and all necessary information is supplied to the Directors on a timely basis to enable them to discharge their duties effectively. Additionally, special meetings will take place or conference calls made when Board decisions are required in advance of regular meetings.

The Board of each Company regularly monitors the performance of the portfolio and the investment targets set by the relevant VCT Regulations. Reports are received from the Manager as to the trading and financial position of each investee company and members of the Investment Team regularly attend the Board meetings. Monitoring reports are also received at each Board meeting on compliance with each Company's investment targets, so that the Boards can monitor that the Venture Capital Trust status of their Company is maintained and take corrective action where appropriate. In addition, each Board receives formal reports from Philip Hare & Associates LLP, its VCT status adviser twice a year.

The Companies presently comply with the provisions of the UK Corporate Governance Code, published by the Financial Reporting Council in July 2018 (the "Code"), save for those provisions relating to the following: (i) the Companies have not appointed a CEO or a recognised senior independent non-executive director, (ii) the presumption concerning each Chair's independence and (iii) the need for an internal audit function. For the reasons set out in the Code, the Boards consider these provisions are not relevant to their Companies, being externally managed VCTs.

3.12 Committees

Audit & Risk Committees

Each Company has an audit & risk committee which meets at least three times a year. The Audit & Risk committees review the actions and judgements of the Manager in relation to the interim and annual financial statements and each Company's compliance with the Code. They review the terms of the management agreement and examine the effectiveness of each Company's internal control systems, receive information from the Manager's compliance department and review the scope and results of the external audit, its cost effectiveness and the independence and objectivity of the external auditors. The audit & risk committees have written terms of reference which define their responsibilities. The audit & risk committee for BSC consists of the BSC Board with Jonathan Cartwright as Chair and the audit & risk committee of BSC2 consists of the BSC2 Board with Roger McDowell as Chair.

Nominations and Remuneration Committee

BSC has a combined nominations and remuneration committee which consists of the BSC Directors, who are considered by the BSC Board to be independent of the Manager.

BSC2 has a combined nominations and remuneration committee which consists of the BSC2 Directors, who are considered by the BSC2 Board to be independent of the Manager.

Jonathan Cartwright is the Chair of BSC's combined nominations and remuneration committee and Peter Waller is the Chair of BSC2's combined nominations and remuneration committee, save when the relevant committee meets to consider a candidate for the Chair. In considering appointments to the Boards, the committees dealing with nominations take into account the ongoing requirements of the Companies and the need to have a balance of skills and experience on the Boards.

Allotment Committees

With regards to the allotment of new Shares, BSC and BSC2 both generally operate through a committee of any one Director. In addition, the Companies' company secretary has an authority to allot Shares under the DRIS. The allotment committees meet as and when required to formally approve the allotment of Shares.

Investment Committee

The Directors of BSC meet as an investment committee of the Board to consider and approve all investment decisions. The committee is chaired by Adam Bastin. The BSC2 Board has determined that due to the investment procedures currently in place, in its opinion there is no role for a separate investment committee.

3.13 Custody arrangements

The Manager is the Companies' Alternative Investment Fund Manager (AIFM) and as part of that role takes responsibility for the safekeeping of the Companies' assets. Given the nature of the Companies' investments, all assets are non-custodial and therefore a third-party custodian has not been appointed.

The Manager is currently changing its regulatory permissions to become a full-scope AIFM; upon this change in regulatory status a third-party depositary, Thompson Taraz Depositary Limited, will be appointed and assume responsibility for the safekeeping of the Companies' assets.

Part 4 The Offers

4.1 Introduction to the Offers

The Offers are seeking to raise £65 million, in aggregate, through the issue of new Shares in each of the Companies. If the Offers are oversubscribed, they may be increased at the discretion of the Companies by a further £25 million, in aggregate. The maximum number of New Shares that may be issued under the Offers by BSC and BSC2 is 80,000,000 and 100,000,000 New Shares respectively and the maximum gross proceeds that either BSC or BSC2 can raise under the Offers is £75,000,000. Investors will have the option to invest in either of the Companies or in any proportion in a combination of the two. The Prospectus assumes Application Amounts will be split 60 per cent into BSC and 40 per cent into BSC2 in accordance with the basis for allocation when the Companies co-invest. The minimum Application Amount accepted under the Offers is £6,000 (including any Facilitated Fee).

4.2 Investment Strategy

The Companies seek to build a broad portfolio of investments in early-stage companies focused on growth, with the aim of spreading the maturity profiles and maximising return, as well as ensuring compliance with the VCT Regulations.

The Companies predominantly invest in unquoted smaller companies and expect that this will continue to make up the significant majority of the portfolio. They will also retain holdings in cash or near-cash Investments to provide a reserve of liquidity which will maximise the Companies' flexibility as to the timing of investment acquisitions and disposals, dividend payments and share buybacks.

Unquoted investments are structured using various investment instruments, including ordinary preference shares, convertible securities and very occasionally loan stock, to achieve an appropriate balance of income and capital growth, having regard to the VCT Regulations. The portfolio is diversified by investing in a broad range of industry sectors. The normal investment period into the portfolio companies is expected to be typically between the range of five to seven years.

4.3 Investment Policy

The investment policy of both Companies is as follows:

The investment policy of the Company is to invest in UK businesses across a broad range of sectors that blends a mix of businesses operating in established and emerging industries that offer opportunities in the application and development of innovation in their products and services.

These investments will all meet the definition of a Qualifying Investment and be primarily in unquoted UK companies. It is anticipated that the majority of these will be re-investing their profits for growth and the investments will comprise mainly equity instruments.

The Company seeks to build a broad portfolio of investments in early-stage companies focused on growth with the aim of spreading the maturity profiles and maximising return as well as ensuring compliance with the VCT guidelines.

Leverage

The Company does not use leverage and has no borrowing facilities, choosing to fund investments from its own resources.

Co-investment

The Companies typically co-invest with each other, the basis for allocation is 60 per cent to BSC and 40 per cent to BSC2. Each Company has discretion as to whether or not to take up or, where the other Company does not take up its allocation, increase its allocation in such co-investment opportunities. The Companies may invest alongside co-investment funds managed by YFM. The Companies have first choice on the initial £4.5 million of all equity investment opportunities meeting the VCT qualifying criteria. Amounts above £4.5 million will be allocated one third to YFM's co-investment funds and two thirds to the Companies.

Asset mix

Cash which is pending investment in VCT-qualifying securities is held in interest bearing instant access, shortnotice bank accounts, money market funds and investment funds listed on a recognised stock exchange (including FCA authorised and regulated UCITS funds).

4.4 VCT Regulations

The Companies' investment policies are designed to ensure that the Companies continue to qualify and are approved as VCTs by HMRC. The current VCT conditions, amongst others, state that the Companies may not invest more than 15 per cent by value of their investments, calculated in accordance with section 278 of the Tax Act ("VCT Value"), in a single company or group of companies and must have at least 80 per cent of its investments by VCT Value throughout the period in shares and securities comprised in Qualifying Holdings. At least 70 per cent by VCT Value of Qualifying Holdings must be in "eligible shares", which are ordinary shares which have no preferential rights to assets on a winding up and no rights to be redeemed but may have certain preferential rights to dividends. At least 10 per cent of each Qualifying Investment must be in eligible shares.

The companies in which investments are made must have no more than £15 million of gross assets at the time of investment and no more than £16 million immediately after the investment to be classed as a Qualifying Holding.

Additionally, the Finance (No. 2) Act 2015 and the Finance Act 2016 have imposed some further conditions in respect of investments, including those regarded as non-Qualifying Investments. These include:

• An aggregate limit of £12 million (or £20 million for Knowledge Intensive Companies) on the amount of Risk Finance State Aid investment a business can receive during its lifetime;

• No more than seven years can have elapsed since the first commercial sale achieved by the business (ten years in the case of a Knowledge Intensive Company), unless:

  • the company has previously raised relevant Risk Finance State Aid and the company is raising further funds for the same business activities, or
  • the investment comprises more than 50 per cent of the average of the previous five years' turnover and the funds are to be used in the business to fund growth into new product markets or geographies.

• VCTs may only invest in Qualifying Holdings and in certain money market securities, shares and securities in a company which are listed on the main market of the London Stock Exchange or a European regulated market, and short-term cash deposits.

4.5 Co-investment policy

The Companies' co-investment policies are set out in their investment policies referred to above.

4.6 The Investment Team

David Hall – Executive Chair

• Chair of YFM's Investment Committee

• Over 30 years of private equity, venture capital and fund management experience

• Has led YFM since 2003

• Economics graduate and Chartered Accountant, qualifying with PwC

Eamon Nolan – Director – Managing Director

• Leads the Executive team

• Previously Head of Investor Relations

• Over 20 years of private equity, venture capital and fund management experience

• Joined YFM in 2014, previously 15 years at 3i, where he was Portfolio Director of their Asset Management Group, having spent eight years in their Small and Medium Investments team

David Bell – Director – Head of Portfolio

• Has led YFM's portfolio management activities since 2009 and chairs YFM's Portfolio Committee

• Over 20 years of private equity, venture capital and fund management experience

• Previously, ten years at 3i, where he was a Portfolio Director

• First class degree in Mathematics from Imperial College

Marcus Karia – Director – CFO

• Responsible for YFM's financial and operational affairs

• Over 15 years of private equity and venture capital experience

• Previously roles at Arix Bioscience plc, a London Stock Exchange firm, Bridges Fund Management, a leading impact investor, and LDC, the private equity arm of Lloyds Bank

• First class degree in Economics from the University of Nottingham. Qualified as a chartered accountant at PwC

Ian Waterfield – Director – Head of Investment (North)

• Leads the Investments team in the North and Midlands across the Leeds, Manchester and Birmingham offices

• Over 20 years of private equity, venture capital and fund management experience

• Joined YFM in 2007, previously 12 years with KPMG, latterly as Associate Director in Transaction Services, acting for a wide variety of clients

• First class degree in Accounting and Finance from Leeds University and Chartered Accountant, qualifying with KPMG

Jamie Roberts – Director – Head of Investment (South)

• Leads the Investments team in the South across the London and Reading offices

• Over ten years of private equity, venture capital and fund management experience

• Joined YFM in 2012, prior to which spent eight years working in Corporate Banking for two UK clearing banks

• BA in Banking and Finance from the University of Wales

Steve Harrison – Head of Portfolio (North)

• Leads the Portfolio team in the North

• Over 15 years of private equity, venture capital and fund management experience

• Joined YFM in 2017, prior to joining YFM spent eight years in investing roles in private equity and eight years in Corporate Finance with Arthur Andersen and Ernst & Young

• Chartered Accountant with a BA Hons degree in Economics

Charlie Winward – Head of Portfolio (South)

• Leads the Portfolio team in the South across the London and Reading offices

• Over 15 years of private equity, venture capital and fund management experience

• Joined YFM in 2022, previously with JP Morgan, IP Group PLC and NVM Private Equity

• Chartered Financial Analyst (CFA): Engineering degree from Bristol University, MBA from University of California

4.7 The investment process

The Manager assesses investment opportunities by reference to a wide range of factors to ensure that investments are appropriate for each Company's investment strategy. Whilst the due diligence and assessment process can differ depending on the stage and sector of each business, it would typically include:

• Initial screening: each prospective investment will initially be assessed by the Investment Team. If it does not meet the investment criteria, it will not be considered further.

• Investee company assessment: the Investment Team work to understand the investee company's senior management team and culture at the company. This will always include numerous meetings with the management team.

• Peer review: the wider investment team, including the Manager's investment approvals committee ("Investment Approvals Committee") members, review the opportunity and consider and challenge the investment case.

• Due diligence: early-stage opportunities are first subject to in house due-diligence; as the process develops, and following agreement of heads of terms with the investee company, third party experts are often commissioned. Due diligence may include financial, commercial, technology, legal and others as necessary.

• Investment Approvals Committee: all investments must be approved by the Investment Approvals Committee. The committee will consider various factors including, but not limited to, the strength of management team, potential return, output from due diligence, the suitability of the investment in line with each Company's investment policy and ESG factors.

• Board approval: Once approved by the Investment Approvals Committee, the opportunity must be approved by the BSC/BSC2 investment committee (comprising of Directors of BSC and/or the BSC2 Boards); these parties will consider the same factors as the Investment Approvals Committee.

• An investment proposal can be rejected at any stage up to and including the BSC/BSC2 Board approval stage.

4.8 Directors

The Directors of the Companies, all of whom are non-executive, are as follows:

BSC

• Rupert Cook Chair (appointed to the Board 1 August 2017, took over the role of Chair on 16 September 2022) specialises in strategy and corporate development, with 30 years' experience of technology companies, including 20 years in corporate finance and investment. He has led multiple fundraisings, acquisitions and sales of technology businesses as well as having co-founded and built up his own consultancy and training business through to sale to a UK plc. Earlier in his career, he was a senior manager at Cap Gemini plc, Director of Advisory Services at Interregnum plc and Head of Technology M&A at goetzpartners corporate finance. As well as being an active angel investor, both in the UK and the US, Rupert is currently a nonexecutive director of Immersive Labs Ltd and Censornet Ltd.

• Adam Bastin Chair of the Investment Committee (appointed 11 September 2019) was most recently EVP, Strategy & Corporate Development of TA Associates-backed Unit4, an ERP software vendor, where he was responsible for strategic direction as well as the acquisition and integration of complementary businesses. Prior to Unit4, Adam spent eight years at Arm Limited, the world's largest semiconductor IP company, where he was VP, Corporate Development and before that Adam worked at BT Group and previously spent ten years in investment banking. Adam therefore brings a well-developed network in the technology sector in the UK and internationally, and brings a wealth of experience of investing in, acquiring and selling smaller companies. Adam is an experienced M&A, corporate finance and investment professional, a qualified management accountant (CIMA), and has served on the boards of various early-stage technology companies.

• Jonathan Cartwright Chair of the Audit & Risk Committee (appointed 1 October 2019) is a chartered accountant with significant experience of the VCT and investment trust sectors. He is a former Chair of Mobeus Income & Growth 4 VCT plc and of Columbia Threadneedle Income and Growth Investment Trust plc.

Purvi Sapre (appointed 6 June 2022) is currently a Managing Director of Sustainable Development Capital LLP, the Investment Manager of SDCL Energy Efficiency Income Trust plc "SEEIT". She is the fund manager for SEEIT and is a member of the SEEIT Investment Committee. Purvi has over 15 years' investment experience in the UK and international capital markets, investing on behalf of debt, equity and impact investment funds, including in energy efficiency and renewable energy projects, across a range of financing structures. She has transacted and managed assets across a number of energy efficiency and renewable energy projects.

BSC2

• Peter Waller Chair (appointed to the Board 1 November 2010, took over the role of Chair on 7 May 2019) is an experienced Chair and director with extensive UK and international executive experience in the IT technology, software and services sector. He initially worked with IBM and Hitachi then with Spring plc, at that time one of the UK's largest recruitment and training businesses. Peter is also Chair of KeyPoint Technologies (UK) Limited and the Director and Founder of Turnberry Management Company Limited. Over the past two decades Peter has worked as a board member with multiple private and public companies. His particular skills are in sales and marketing and working with companies to develop successful sales growth strategies.

• Barbara Anderson (appointed 1 October 2020) is an experienced Non-Executive Director and Chair who has worked extensively with SMEs, third sector and PLCs in regulated sectors, international private companies and venture capital specialists. Amongst other roles, Barbara is currently Non-Executive Director and Chair of Audit & Risk at Sovereign Housing Association, Independent Board Member and Chair of Audit & Risk at SmartDCC Ltd and Non-Executive Director and Chair of the Remuneration Committee at British Business Bank plc. Her expertise includes innovation for growth and sustainability including ESG, strategic planning, start-up acceleration and business transformation.

• Roger McDowell Chair of the Audit & Risk Committee (appointed 6 March 2019) has considerable experience as a Chair and Non-Executive Director of a wide range of technology, business services and manufacturing businesses. Following the flotation of his family's business and subsequent trade sale, he began his plural career in 2000, when he took board roles in three private equity backed technology businesses. He is Chair of Hargreaves Services Plc, Avingtrans Plc, Flowtech Fluidpower Plc and Brand Architekts Group Plc and Non-Executive Director of Tribal Group Plc and Proteome Sciences Plc. Roger is Chair of the Audit & Risks Committee at Proteome Sciences.

The present aggregate shareholdings of the Directors in the Company of which they are directors are as follows:

	Name	Present aggregate Shareholding
BSC	Rupert Cook	222,666
	Adam Bastin	13,247
	Jonathan Cartwright	26,494
	Purvi Sapre	7,028
BSC2	Peter Waller	63,811
	Barbara Anderson	485,740
	Roger McDowell	751,244

4.9 Terms of the Offers

The Offers are to raise up to £65 million, in aggregate, and if they are oversubscribed, they may be increased by a further £25 million, in aggregate, at the discretion of the Companies. The maximum number of New Shares that may be issued under the Offers by BSC and BSC2 is 80,000,000 and 100,000,000 New Shares respectively and the maximum gross proceeds that either BSC or BSC2 can raise under the Offers is £75,000,000. In the event that Applications are received in excess of the maximum subscription under the Offers, the Directors reserve the right to use their absolute discretion in the allocation of successful Applications. There is a minimum subscription of £6,000 (including any Facilitated Fee) in aggregate under the Offers. The New Shares will rank pari passu with existing Shares. There is no maximum amount that can be subscribed under the Offers. However, prior to subscribing to the Offers, Investors may wish to consider that, as detailed in Part 5 of this document, tax reliefs are restricted to a maximum VCT allowance, in all VCTs in any single tax year, of £200,000 (including shares issued under a DRIS) per Qualifying Investor.

The results of the Offers will be announced through a Regulatory Information Service within three Business Days of the closing of the Offers. Subject to the Offers remaining open for both Companies, Investors will have the option to invest 60 per cent in BSC and 40 per cent in BSC2 or in any proportion in a combination of the two. In the event that one of the Offers for which an Applicant has applied has closed or is fully subscribed by the time the Application is processed, the Applicant may elect to reallocate the Application to the remaining Offer or to have the Application in respect of the closed/fully subscribed Offer returned to them.

An application has been made to the FCA for the New Shares to be admitted to the premium segment of the Official List and will be made to the London Stock Exchange for the New Shares to be admitted to trading on its main market for listed securities. It is expected that such admission will become effective and that dealings in the New Shares will commence within ten Business Days of their allotment. The New Shares will be created under the Act, issued on a fully paid up basis and in registered form and temporary documents of title will not be issued. Evidence of title will be through possession of a share certificate in the Shareholder's name. Alternatively, the New Shares may be held in an account through the CREST system. The New Shares will be transferable in both certificated and uncertificated form. The Companies will apply for the New Shares to be admitted to CREST and it is expected that the New Shares will be so admitted, and accordingly enabled for settlement in CREST, as soon as practicable after Admission has occurred. Upon receipt of their new share certificate(s), Shareholders wishing to dematerialise their New Shares into CREST should contact their broker who can advise on the CREST stock deposit procedure. Share and tax certificates are expected to be posted to Shareholders within ten Business Days of each allotment. The ISIN of the BSC Shares is GB0001403152. The ISIN of the BSC2 Shares is GB0005001796.

The Offers may not be withdrawn after dealings in the New Shares have commenced. In the event of any requirement for either of the Companies to publish a supplementary prospectus, Applicants who have yet to be entered into that Company's register of members will be given two days to withdraw from their subscription. Applicants should note, however, that such withdrawal rights are a matter of law that is yet to be tested in the courts of England and Wales and Applicants should, therefore, rely on their own legal advice in this regard.

The Offers open on 20 September 2023 and will close no later than 5 April 2024 or earlier should the Offers become fully subscribed. The deadline for receipt of Application Forms and cleared funds is the close of business on 28 March 2024, subject to the Offers not being fully subscribed prior to this date. The first allotment of up to £30,000,000 of New Shares will be made after 1 January 2024 and on or before 31 January 2024 and the second and final allotment under the Offers will be made after 28 March 2024 and on or before 5 April 2024. The Directors may, at their discretion, make allotments of New Shares at any time prior to the close of the Offers. Details of such allotments will be announced through a Regulatory Information Service provider by no later than the Business Day following the allotment.

4.10 Pricing of the Offers

Pricing Formula

The number of New Shares to be allotted under an Offer will be determined by the following formula:

A – B – C – D + E
NAV per Share	where:
A	is the subscription accepted under the relevant Offer, including a pro-rata share between the Companies of any Facilitated Fee ("Offer Amount");
B	is the pro-rata share between the Companies of any Facilitated Fee (up to 4.5 per cent of the Offer Amount);
C	is the Initial Application Fee of 3.0 per cent of the Offer Amount (3.5 per cent of the Offer Amount for Applications received from Applicants who have not invested their money through an Intermediary/Financial Adviser and have invested directly into the Companies);
D	where applicable, is initial commission of 2.0 per cent of the Offer Amount payable to an execution-only broker or platform or an Intermediary of a professional investor;
E	where applicable, is the amount of initial commission waived by an execution-only broker or platform (up to a maximum of 2.0 per cent of the Offer Amount); and
NAV per Share	NAV per Share is the most recently published NAV per Share of the relevant Company, adjusted for any subsequent dividends paid or declared (and in respect of which no adjustment has been made to that latest published NAV per Share).

Applicants whose Applications are accepted and contribute cleared funds to the first £20 million of subscriptions accepted under the Offers will receive additional New Shares equivalent to 0.25 per cent of their respective Offer Amounts. Applicants whose Applications are accepted and contribute cleared funds to the next £10 million of subscriptions accepted under the Offers will receive additional New Shares equivalent to 0.125 per cent of their respective Offer Amounts. These additional New Shares will be paid for by YFM Private Equity Limited, the Companies' Manager.

To the extent possible, Applicants will receive additional New Shares equivalent to receiving a 3.70 per cent per annum rate of return on funds awaiting allotment, calculated by reference to the number of days between the acceptance of an Application (including full receipt of cleared funds) and the date of allotment. This rate is subject to change.

The number of New Shares to be issued by each Company under the Offers will be rounded down to the nearest whole number (fractions of New Shares will not be allotted). If there is a surplus of funds from an Application Amount, the balance will be returned (without interest) by BACS transfer; save where the amount is less than £2.00, in which case it will be retained by the relevant Company.

Where Applicants have provided an email address in their Application, the Receiving Agent will send the Applicant a link to the Application tracking service where the Applicant, if accepted, can obtain their allotment letter and income tax relief certificate within three Business Days of the allotment. Share certificates will follow by post within ten Business Days. Where Applicants have not provided an email address, the Receiving Agent will despatch to Applicants whose Applications are accepted, within ten Business Days of the allotment date, an allotment letter, a share certificate and an income tax relief certificate.

As at the date of this Document the most recently published (unaudited) NAVs were 83.7p and 57.95p for BSC and BSC2 respectively, being the unaudited NAVs as at 30 June 2023 for BSC and BSC2 respectively. Since 30 June 2023, BSC paid an interim dividend of 2.0p per BSC Share on 28 July 2023 and BSC2 has declared a further interim dividend of 1.5p per BSC2 Share, which will be paid on 3 November 2023. New Shares issued under the Offers will not be eligible for any of the above dividends.

The maximum aggregate amount to be raised by the Companies under the Offers, including the over-allotment facility, is £90 million. For illustrative purposes, assuming New Shares are issued at an illustrative Offer Price of 84.227p and 58.196p for BSC and BSC2 respectively (as set out on page 37), the maximum number of New Shares that will be issued under the Offers by BSC and BSC2, assuming a 60 per cent/40 per cent split between BSC and BSC2 respectively, is 64,112,607 New Shares and 61,860,053 New Shares by BSC and BSC2 respectively (although the actual number of New Shares that will be issued by each of the Companies will depend on the Offer Prices which could be higher or lower than the illustrative Offer Prices of 84.227p and 58.196p).

Each of the Boards may close the Offers in respect of its Company earlier than the date stated on page 16. The Boards further reserve the right to accept an Application Form and to allot and arrange the listing of New Shares in respect of Applications received on or prior to the closing date of the Offers as the Boards see fit, which may not be on the dates stated on page 16.

Illustrative Offer Prices

An illustration of the application of the Pricing Formula based on the most recently published (unaudited) NAVs as at 30 June 2023 of 83.7p and 57.95p for BSC and BSC2 respectively (and in the case of BSC adjusting for the interim dividend of 2.0p per BSC Share that was paid on 28 July 2023 and in the case of BSC2 adjusting for the interim dividend of 1.5p per BSC2 Share that will be paid on 3 November 2023), assuming a full subscription, including the over-allotment facility, and a 60 per cent/40 per cent split between BSC and BSC2 respectively, is set out below.

BSC

		Through a Financial Advisor, no Facilitated	Through a Financial Advisor, Facilitated	Execution only platform or broker, 2% initial commission	Execution only platform or broker, no initial commission
	Direct	Fee	Fee of 2%	waived	waived
Maximum amount raised			£54,000,000 £54,000,000 £54,000,000 £54,000,000 £54,000,000
Facilitated Fee	-		- (£1,080,000)	-	-
Initial Application Fee (3.0 per cent – Direct 3.5 per cent)					(£1,890,000) (£1,620,000) (£1,620,000) (£1,620,000) (£1,620,000)
Initial commission (2 per cent)	-	-			- (£1,080,000) (£1,080,000)
Initial commission waived	-	-	-	£1,080,000	-
Net amount invested			£52,110,000 £52,380,000 £51,300,000 £52,380,000 £51,300,000
NAV per BSC Share	81.7p	81.7p	81.7p	81.7p	81.7p
Number of Shares issued	63,782,129	64,112,607	62,790,697	64,112,607	62,790,697
Illustrative Offer Price*	84.633p	84.227p	86.000p	84.227p	86.000p

BSC2

		Through a	Through a	Execution only platform or	Execution only platform
		Financial	Financial	broker, 2%	or broker,
		Advisor, no	Advisor,	initial	no initial
		Facilitated	Facilitated	commission	commission
	Direct	Fee	Fee of 2%	waived	waived
Maximum amount raised			£36,000,000 £36,000,000 £36,000,000 £36,000,000 £36,000,000
Facilitated Fee	-	-	(£720,000)	-	-
Initial Application Fee
(3.0 per cent – Direct 3.5 per cent)					(£1,260,000) (£1,080,000) (£1,080,000) (£1,080,000) (£1,080,000)
Initial commission (2 per cent)	-	-	-	(£720,000)	(£720,000)
Initial commission waived	-	-	-	£720,000	-
Net amount invested			£34,740,000 £34,920,000 £34,200,000 £34,920,000 £34,200,000
NAV per BSC2 Share	56.45p	56.45p	56.45p	56.45p	56.45p
Number of Shares issued	61,541,186	61,860,053	60,584,588	61,860,053	60,584,588
Illustrative Offer Price*	58.497p	58.196p	59.421p	58.196p	59.421p

* The example Offer Prices shown above are for illustrative purposes only as the NAVs may be different for the purposes of calculating the number of New Shares allotted to Applicants under the Offers (which may be higher or lower than in the examples above).

Illustrative share allotments

Set out below is an illustration of the number of New Shares that would be allotted for an Application of £10,000, based on the illustrative Offer Prices on page 37. Where applicable these examples assume no Initial Application Fee discount, a Facilitated Fee of 0.5 per cent or 2 per cent, 2 per cent of the initial commission is waived by the financial Intermediary and no initial commission is waived by the financial Intermediary.

BSC

					Execution only	Execution only
		Through a	Through a	Through a	platform or	platform or
		Financial	Financial	Financial	broker,	broker,
		Advisor, no	Advisor,	Advisor,	2% initial	no initial
		Facilitated	Facilitated	Facilitated	commission	commission
	Direct	Fee	Fee of 0.5%	Fee of 2%	waived	waived
Application Amount	£10,000	£10,000	£10,000	£10,000	£10,000	£10,000
Facilitated Fee	-	-	(£50)	(£200)	-	-
Initial Application Fee	(£350)	(£300)	(£300)	(£300)	(£300)	(£300)
Initial commission	-	-	-	-	(£200)	(£200)
Initial commission waived	-	-	-	-	£200	-
Amount invested	£9,650	£9,700	£9,650	£9,500	£9,700	£9,500
NAV per BSC Share	81.7p	81.7p	81.7p	81.7p	81.7p	81.7p
Illustrative number of
New Shares to be allotted	11,811	11,872	11,811	11,627	11,872	11,627
Illustrative Offer Price
as set out on page 37	84.663p	84.227p	84.663p	86.000p	84.227p	86.000p

BSC2

					Execution only	Execution only
		Through a	Through a	Through a	platform or	platform or
		Financial	Financial	Financial	broker,	broker,
		Advisor, no	Advisor,	Advisor,	2% initial	no initial
		Facilitated	Facilitated	Facilitated	commission	commission
	Direct	Fee	Fee of 0.5%	Fee of 2%	waived	waived
Application Amount	£10,000	£10,000	£10,000	£10,000	£10,000	£10,000
Facilitated Fee	-	-	(£50)	(£200)	-	-
Initial Application Fee	(£350)	(£300)	(£300)	(£300)	(£300)	(£300)
Initial commission	-	-	-	-	(£200)	(£200)
Initial commission waived	-	-	-	-	£200	-
Amount invested	£9,650	£9,700	£9,650	£9,500	£9,700	£9,500
NAV per BSC2 Share	56.45p	56.45p	56.45p	56.45p	56.45p	56.45p
Illustrative number of
New Shares to be allotted	17,094	17,183	17,094	16,829	17,183	16,829
Illustrative Offer Price
as set out on page 37	58.497p	58.196p	58.497p	59.421p	58.196p	59.421p

4.11 Costs of the Offers

The initial costs of the Offers comprise (i) an Initial Application Fee of 3.0 per cent of the Application Amount (3.5 per cent for Applications received from Applicants who have not invested their money through an Intermediary/Financial Adviser and have invested directly into the Companies) and (ii) the initial commissions payable by the Companies in respect of Applications received through certain Intermediaries.

Applicants whose Applications are accepted and contribute cleared funds to the first £20 million of subscriptions accepted under the Offers will receive additional New Shares equivalent to 0.25 per cent of their respective Offer Amounts. Applicants whose Applications are accepted and contribute cleared funds to the next £10 million of subscriptions accepted under the Offers will receive additional New Shares equivalent to 0.125 per cent of their respective Offer Amounts. These additional New Shares will be paid for by YFM Private Equity Limited, the Companies' Manager.

To the extent possible, Applicants will receive additional New Shares equivalent to receiving a 3.70 per cent per annum rate of return on funds awaiting allotment, calculated by reference to the number of days between the acceptance of an Application (including full receipt of cleared funds) and the date of allotment. This rate is subject to change.

Initial Application Fee

The Initial Application Fee is 3.0 per cent of the Application Amount (3.5 per cent for Applications received from Applicants who have not invested their money through an Intermediary/Financial Adviser and have invested directly into the Companies) and is paid by the relevant Company to the Manager. Assuming gross proceeds of £90 million are raised under the Offers from Applicants investing through Intermediaries/Financial Advisers, that those proceeds are allocated 60 per cent to BSC and 40 per cent to BSC2 and that none of the Applications benefit from an Initial Application Fee discount, the Initial Application Fee payable by BSC will be £1,620,000, which represents 1.0 per cent of BSC's net assets as shown in its audited financial statements for the year ended 31 March 2023 and the Initial Application Fee payable by BSC2 will be £1,080,000, which represents 0.8 per cent of BSC2's net assets as shown in its unaudited financial statements for the 6 months ended 30 June 2023. In consideration, the Manager has agreed to meet the costs associated with the Offers, including any additional New Shares issued on the first £30 million of subscriptions, save for commissions payable to Intermediaries, on behalf of the Companies and the Manager will, therefore, be responsible for all of these costs.

Commissions

Commission is permitted to be paid to Intermediaries in certain limited circumstances, such as in respect of execution only clients (where no advice or personal recommendation has been added) or where the Intermediary has demonstrated that the Investor is a professional client of the Intermediary. Those Intermediaries that are permitted to receive commission will receive an initial commission of 2.0 per cent of the amount invested by their clients under the Offers. Intermediaries may waive, in full or in part, the initial commission in favour of New Shares for the Applicant. Provided that the Companies agree to pay trail commission, that the Intermediary continues to act for the Investor and that the Investor continues to be the beneficial owner of the New Shares, subject to applicable laws and regulations the Intermediary can be paid total trail commission of up to 2.5 per cent in aggregate of their client Investors' Application Amount, paid as 0.5 per cent per annum over a period of up to five years. Trail commission in respect of the Offers will be paid annually (commencing in 2025) by the relevant Company.

Where initial commission is payable the Intermediary may agree to waive all or part of the initial commission in respect of an Application. If this is the case, the commission waived will be added to the amount subscribed and New Shares will be allotted to the Investor at the relevant Offer Price. Intermediaries must indicate on the Application Form the basis on which they wish to receive their commission.

Assuming the costs of the Offers are 5.0 per cent of the gross proceeds of the Offers and that all Applications are made through execution only brokers and no execution only commission is waived, the net proceeds of the Offers for each of the Companies, assuming a full subscription, including the over-allotment facility, and a 60 per cent/40 per cent split between BSC and BSC2 respectively, would be £51,300,000 and £34,200,000 for BSC and BSC2 respectively.

Adviser Charges

The Companies have agreed to facilitate the payment of one-off Adviser Charges (up to 4.5 per cent of the Offer Amount), by accepting instructions from an Investor to deduct the amount of the fee agreed by them with their Financial Adviser, from the amount they send to the Companies. Ongoing fees to Intermediaries will not be facilitated by the Companies. The amount of any Facilitated Fee to be facilitated in this manner should be specified in Section 8 of the Application Form, and the Facilitated Fee will be paid to the relevant Financial Adviser on behalf of the Applicant from an equivalent amount due to the Applicant from the Companies. The Investor will be issued fewer New Shares (to the equivalent value of the Facilitated Fee) as set out on page 38. Where the Facilitated Fee stated on the Application Form is exclusive of VAT, the Investor may remain liable for the VAT element thereof.

Income tax relief should still be available on the total amount subscribed, before deduction of Facilitated Fees, subject to VCT Regulations and personal circumstances.

Advising ordinary retail Investors

The Companies currently conduct their affairs so that the Shares can be recommended by Financial Advisers or Intermediaries to ordinary retail Investors in accordance with the FCA's rules in relation to non-mainstream investment products and intend to continue to do so for the foreseeable future. The FCA's restrictions which apply to non-mainstream investment products do not apply to the Shares because they are shares in a VCT which, for the purposes of the FCA rules relating to non-mainstream investment products, are excluded securities and may be promoted to ordinary retail Investors without restriction.

Application procedure

You may complete and submit your Application Form online at www.bscfunds.com. A blank Application Form can be found on the Companies' website together with explanatory notes.

Applications under the Offers will be accepted on a "first-come, first-served" basis, subject always to the discretion of the relevant Board. For these purposes, "first-come, first served" shall be assessed based on the date and time of receipt of a fully completed Application, subject to receipt of Application monies (in full) in cleared funds by the earlier of an Offer deadline or within five Business Days from receipt of Application to retain the Applicant's position of priority. If Application monies are not received within such time, the relevant date and time shall be when the Applicant's Application monies are received in cleared funds. An Application may not be considered as "complete" until identity verification is completed and/or, where relevant, information or supporting evidence required for the Application is no longer outstanding. Investors are encouraged to submit their Application Forms early in order to be confident that their Application will be successful.

Applications accompanied by a post-dated cheque will not be accepted. Multiple Applications under the Offers from the same Investor will be processed in order of receipt. The Companies may, in their absolute discretion, reject Applications if cheques do not clear on first presentation.

The Terms and Conditions of Application for the New Shares under the Offers are set out on pages 84 to 87 of this Prospectus. By signing the Application Form, Investors will be declaring that they have read the Terms and Conditions of Application and agree to be bound by them. Prior to completing an Application Form, Investors are advised to read the notes on how to complete the Application Form.

Completed Application Forms submitted by post/hand should be sent to:

BSC & BSC2 Offers The City Partnership (UK) Ltd The Mending Rooms Park Valley Mills Meltham Road Huddersfield HD4 7BH

Alternatively, you may complete and return your Application by email to bscfunds@city.uk.com.

YFM, RAM Capital and City are acting exclusively for the Companies and for no one else in relation to the Offers. Apart from the responsibilities and liabilities, if any, which may be imposed on YFM, RAM Capital and City by FSMA or the regulatory regime established thereunder, YFM, RAM Capital and City will not be responsible to anyone else other than the Companies for providing the protections afforded to their clients or for advising any other persons in relation to the Offers or any transaction contemplated in or by this Prospectus.

YFM, RAM Capital and City are not providing investment, financial or tax advice in relation to the Offers.

4.12 Annual charges

Management and administration

BSC

The annual fee for the twelve months to 31 March 2023 was £2,782,000, equal to 1.7 per cent of the average NAV.

The annual fee payable to the Manager is calculated as 1.0 per cent on all surplus cash, defined as all cash above £7.5 million. The annual fee on all other assets is 2.0 per cent per annum. This is calculated half yearly at 31 March and 30 September.

The Manager also provides and procures the provision of secretarial and administration services to BSC. The Manager receives an annual accounting and secretarial fee, index linked, which is currently £85,000, equal to 0.05 per cent of the average NAV.

BSC2

The annual fee for the twelve months ending 31 December 2022 was £1,786,000, equal to 1.7 per cent of the average NAV.

The annual fee payable to the Manager is calculated as 1.0 per cent on all surplus cash, defined as all cash above £5 million. The annual fee on all other assets is 2.0 per cent per annum. This is calculated half yearly at 30 June and 31 December.

The Manager also provides and procures the provision of secretarial and administration services to BSC2. The Manager receives an annual accounting and secretarial fee, index linked, which is currently £85,000, equal to 0.08 per cent of the average NAV.

Performance fee

BSC

A performance incentive fee is payable subject to BSC achieving a target level of Total Return (the "BSC Total Return Hurdle") and dividend ("BSC Dividend Hurdle"). Subject to meeting the BSC Total Return Hurdle, the Manager will receive an amount equivalent to 20 per cent of the amount by which dividends paid per BSC Share exceeds the BSC Dividend Hurdle, multiplied by the number of BSC Shares in issue at the year end. The incentive fee in any financial year will be subject to a cap if the excess of dividends paid over the BSC Dividend Hurdle is greater than the sum of the excess of the BSC Total Return over the BSC Total Return Hurdle divided by 1.2. With effect from 31 March 2019 the BSC Total Return Hurdle was 228.6 pence per BSC Share and the annual increase is equivalent to 4.0 pence per BSC Share, as increased or decreased by the percentage increase or decrease (if any) in RPI from 1 April 2009. For the year ended 31 March 2023 the annual increase in the BSC Total Return Hurdle was 6.1 pence per BSC Share.

The BSC Dividend Hurdle was 4.0 pence per BSC Share (increasing in line with RPI) from 1 April 2009. For the year ended 31 March 2023 the BSC Dividend Hurdle was 6.1 pence per BSC Share.

The incentive fee payable for the year ended 31 March 2023 was calculated as follows:

	2023
Total Return Hurdle (p)	258.20
Actual Total Return per Share before incentive fee (p)	258.60
Excess over Total Return Hurdle (p)	0.40
Dividend Hurdle (p)	6.10
Actual Dividends per share (p)	8.50
Excess over Dividend Hurdle (p)	2.40
Lower excess of the two hurdles (p)	0.40
Fee impact reduction (divide by 1.2) (p)	0.333
Performance fee per share at 20% of adjusted excess (p)	0.067
Number of shares in issue ('000)	187,679
Incentive fee payable (£'000)	125

The BSC Total Return Hurdle for the year ending 31 March 2024 is 265.5 pence per BSC Share. The BSC Dividend Hurdle is 7.0 pence per BSC Share.

If the annual incentive fee exceeds £5.0 million then the excess is deferred until following the next year's Annual General Meeting. Payment of the remainder is made five Business Days after the relevant Annual General Meeting at which the audited accounts are presented to shareholders.

The amount of the incentive payment paid to the Manager for any one year shall, when taken with all other relevant costs, ensure that BSC's total costs in a single year do not exceed 5 per cent of net assets. Any excess over the 5 per cent is carried forward to be included in the calculation of the amount that can be paid in future years. Except with shareholder approval the maximum fee payable in any 12 month period will not exceed £7.5 million.

There are also provisions for a compensatory fee in circumstances where BSC is taken over or the incentive agreement between BSC and the Manager is terminated, which is calculated as a percentage of the fee that would otherwise be payable under that incentive agreement by reference to the accounting period following its termination. In this instance 80 per cent is payable in the first accounting period after such an event, 55 per cent in the second, 35 per cent in the third and nothing is payable thereafter.

BSC2

A performance incentive fee is payable when the aggregate of cumulative dividends paid as at the last Business Day in December each year and the average of the middle market price per BSC2 Share on the five Business Days prior to that day, exceeds 120 pence per BSC2 Share (the "BSC2 Hurdle"). The fee is 20 per cent of the excess over this amount multiplied by the number of BSC2 Shares in issue and the BSC2 Shares under option (if any). Once the BSC2 Hurdle has been exceeded it is reset at that value going forward, which becomes the new BSC2 Hurdle. The fee is payable in cash or BSC2 Shares granted through rights to subscribe. These rights are exercisable in the ratio 95:5 between the Manager and Chord Capital Limited respectively.

As at 31 December 2022 the total of cumulative cash dividends paid and mid-market price was 137.25 pence per BSC2 Share. Consequently the BSC2 Hurdle was exceeded and a performance related incentive of £635,000 was payable for the year ended 31 December 2022. The BSC2 Hurdle for the year ending 31 December 2023 is reset at 137.25 pence per BSC2 Share.

The Net Asset Value and Total Return as at 30 June 2023 is stated after an incentive fee accrual of £1,180,000 in relation to the year ending 31 December 2023. The accrual is based on the total of the share price per BSC2 Share and cumulative dividends paid as at 30 June 2023.

Other fees received by the Manager

In addition to the fees described above, which are paid by the Companies, the Manager receives advisory fees in connection with new investments which are paid by the relevant investee company. In respect of each of the Companies there is an aggregate annual cap applied to these fees for new investments of 3 per cent and for further investments of 2 per cent, with any fees above this cap being payable to the Companies. Where expenses have been incurred and the investment does not proceed, the Manager pays any abort fees. The Manager also receives monitoring or non-executive director fees from unquoted portfolio companies. In respect of each of the Companies these fees are capped at a maximum of £40,000 per annum for an unquoted company. The aggregate of these fees received by the Manager in the twelve months to 31 March 2023 was £2,261,000.

4.13 Conflicts of Interest

The Companies have built strong relationships with many of the companies in which they invest, and sometimes this can present "conflicts of interest" as explained below.

With these relationships, there is a chance that the interests of one group of investors will be at odds, or present a conflict, with the interests of another group or with the interests of the Manager. The Companies and the Manager aim to ensure that the interests of the Shareholders are always looked after. Conflicts of interest are sometimes unavoidable. In the first instance, the Companies and the Manager look to prevent these, but if they cannot they will take action to manage or mitigate any effect. For more information on some of the main conflicts please see below.

Investing alongside other funds managed by YFM Private Equity

The Investment Team have previously invested funds from the Companies alongside other YFM Private Equity Limited managed products or services, and expects to do so again going forward. This means an investee company can benefit from more diverse sources of funding while still partnering with the Manager, which in turn could make the Manager a more attractive investor for entrepreneurs.

The Companies will retain pre-emption rights, including a right of first refusal, on all existing holdings. Investments into new businesses made by YFM Private Equity Limited managed funds will be allocated between the Companies and any co-investing YFM Private Equity Limited managed funds and services in accordance with an allocation policy (the "Allocation Policy"), which has been agreed by the Boards. Any changes to this policy which may impact the Companies will require Board approval.

The role of the Manager's employees

The Manager often places one of its employees on the board of the companies it invests in, either as an observer or a director. This means the Manager is able to closely monitor the investment it has made on behalf of the Companies. However, this also means that, as company directors, those employees have obligations to all shareholders of the portfolio company, and not just Shareholders.

When could conflicts of interest be harmful to investors?

Some investments held by the Companies could have investors across more than one YFM Private Equity Limited managed fund and as a result the interests of all parties may not be fully aligned. The Manager has agreed policies and processes in place to ensure that any transactions that affect more than one group of investors are managed fairly; however, sometimes certain groups of investors may still be restricted in the timing of an exit.

Managing conflicts

The Companies and the Manager have a number of controls in place to manage any conflicts of interest where they cannot prevent them. These include:

• The Manager's Investment Approvals Committee ensures investment decisions are in the best interests of investors, including how potential conflicts of interest are managed when they cannot be avoided, as well as being responsible for ensuring compliance with the Allocation Policy. The Allocation Policy sets out how the amount invested from each fund into each opportunity is determined.

• Each Company's audit & risk committee and the board of the Manager are responsible for ensuring conflicts are handled appropriately.

• As the Companies are publicly listed companies, they have their own Board of Directors, who are required to act independently and represent Shareholders' best interests at all times. The Boards are ultimately responsible for ensuring the investment strategy and policy of each Company is carried out. Each Board also approves the Allocation Policy.

Part 5 Taxation Considerations

1. Tax position of Investors

The following is only a summary of the current law concerning the tax position of individual Qualifying Investors in VCTs. Potential Investors are recommended to consult a duly authorised independent Financial Adviser as to the taxation consequences of an investment in a VCT. The tax rules or their interpretation in relation to an investment in the Companies and/or rates of tax may change during the life of the Companies and can be retrospective. Tax legislation in the Investor's member state may have an impact on the income received from the New Shares.

2. Tax reliefs

The tax reliefs set out below are those currently available to individuals aged 18 or over who subscribe for New Shares under the Offers and will be dependent on personal circumstances. Whilst there is no specific limit on the amount of an individual's acquisition of shares in a VCT, tax reliefs will only be given to the extent that the total of an individual's Applications or other acquisitions of shares in VCTs (including shares issued under a DRIS) in any tax year does not exceed £200,000. Qualifying Investors who intend to invest more than £200,000 in VCTs in any one tax year should consult their professional advisers.

2.1 Income tax

2.1.1 Relief from income tax on investment

A Qualifying Investor subscribing for New Shares will be entitled to claim income tax relief on amounts subscribed up to a maximum of £200,000 invested in VCTs in any tax year.

The relief is given at the rate of 30 per cent on the amount subscribed regardless of whether the Qualifying Investor is a higher rate, additional rate or basic rate tax payer, provided that the relief is limited to the amount which reduces the Qualifying Investor's income tax liability to nil. Investments to be used as security for or financed by loans may not qualify for relief, depending on the circumstances.

2.1.2 Dividend relief

A Qualifying Investor, who acquires shares in any VCT in any tax year having a value up to a maximum of £200,000, will not be liable to income tax on dividends paid on those shares and there is no withholding tax thereon.

2.1.3 Purchases in the market

A Qualifying Investor who purchases existing shares in the market will be entitled to claim dividend relief (as described in paragraph 2.1.2 above) but not relief from income tax (as described in paragraph 2.1.1 above).

2.1.4 Withdraw of relief

Relief from income tax on an application for VCT shares (including an Application for New Shares) will be withdrawn if the VCT shares are disposed of (other than between spouses or on death) within five years of issue or if the VCT loses its approval within this period as detailed in paragraph 2.3 on page 46.

Dividend relief ceases to be available once the Qualifying Investor ceases to be beneficially entitled to the dividend or if the VCT loses its approval within this period as detailed on page 46.

2.1.5 Linked sales

If an Investor subscribes for shares (except for shares issued under DRIS) in a VCT within six months before or after selling any shares in that same VCT or in some cases a VCT which merges with that VCT, or if there is a contractual link between the application and the disposal, the tax reliefs in relation to that will apply only to the amount invested less the amount for which shares are sold.

2.2 Capital gains tax

2.2.1 Relief from capital gains tax on disposal of VCT shares

A disposal by a Qualifying Investor of VCT shares will give rise to neither a chargeable gain nor an allowable loss for the purposes of UK capital gains tax. The relief is limited to the disposal of VCT shares acquired within the limit of £200,000 for any tax year.

2.2.2 Purchases in the market

An individual purchaser of existing shares in the market will be entitled to claim relief from capital gains tax on disposal (as described in paragraph 2.2.1 above).

2.3 Loss of VCT approval

For a company to be fully approved as a VCT it must meet the various requirements for full approval as set out on pages 46 and 47.

If a company which has been granted approval as a VCT subsequently fails to comply with the conditions for approval, approval as a VCT may be withdrawn. In these circumstances, relief from income tax on the initial investment is repayable unless loss of approval occurs more than five years after the issue of the relevant VCT shares. In addition, relief ceases to be available on any dividend paid in respect of the profits or gains in any accounting period ending when the VCT status has been lost and any gains on the VCT shares up to the date from which loss of VCT status is treated as taking effect will be exempt from capital gains tax, but gains thereafter will be taxable.

3. Illustration of effect of tax relief for Qualifying Investors

The table below has been prepared for illustrative purposes only and does not form part of the summary of the tax reliefs contained in this section. The table shows how the initial tax reliefs available can reduce the effective cost of an investment of £10,000 in a VCT by a Qualifying Investor subscribing for VCT shares to only £7,000:

	Effective Cost	Tax Relief
Investor unable to claim any tax reliefs	£10,000	Nil
Qualifying Investor able to claim tax reliefs	£7,000	£3,000

Income tax relief is only available if the shares are held for the minimum holding period of five years. The limit for obtaining income tax relief in VCTs is £200,000 in each tax year.

4. Obtaining tax reliefs

The Companies will provide to each Qualifying Investor a certificate which the Qualifying Investor may use to claim income tax relief, either by obtaining from HMRC an adjustment to their tax coding under the PAYE system or by waiting until the end of the tax year and using their tax return to claim relief.

Tax position of the Companies

The following is only a summary of the conditions to be satisfied for a company to be treated as a VCT.

The Companies have to satisfy a number of tests to qualify as a VCT. A summary of these tests is set out below:

1. Qualification as a VCT

To obtain Venture Capital Trust status a company must be approved by HMRC as a Venture Capital Trust. A Venture Capital Trust must be approved at all times. A Venture Capital Trust cannot be approved unless the tests detailed below are met throughout the most recent complete accounting period of the Venture Capital Trust and HMRC is satisfied that they will be met in relation to the accounting period of the Venture Capital Trust which is current when the application is made. Where a Venture Capital Trust raises further funds, it is given a grace period to invest those funds before the funds become subject to such tests. To maintain approval, the conditions summarised below must continue to be satisfied throughout the life of the Venture Capital Trust:

(a) the Venture Capital Trust's income must have been derived wholly or mainly from shares and securities;

• (b) no holding in a company (other than a Venture Capital Trust or a company which would, if its shares were listed, qualify as a Venture Capital Trust) by the Venture Capital Trust may represent more than 15 per cent, by value, of the Venture Capital Trust's total investments at the time of investment;
• (c) the Venture Capital Trust must not have retained more than 15 per cent of the income derived from shares or securities in any accounting period;
• (d) the Venture Capital Trust must not be a close company. Its ordinary share capital must be listed on the main London Stock Market or a regulated European market;
• (e) at least 80 per cent, by value, of its investments must be represented by shares or securities comprising Qualifying Investments;
• (f) at least 30 per cent, by value, of funds raised from shares issued in accounting periods beginning on or after 6 April 2018 must be invested in Qualifying Investments of investee companies by the anniversary of the end of the accounting period in which those shares are issued;
• (g) at least 70 per cent by value of the Venture Capital Trust's Qualifying Investments must be in "eligible shares", that is ordinary shares which carry no preferential rights to assets on a winding up and no rights to be redeemed although they may have certain preferential rights to dividends so long as that right is non-cumulative and is not subject to discretion (investments made prior to 6 April 2018 from funds raised before 6 April 2011 are excluded from this requirement);
• (h) at least 10 per cent of the Venture Capital Trust's total investment in each Qualifying Investment must be in eligible shares, as described above;
• (i) the Venture Capital Trust must not make an investment in a company which causes that company to receive more than £5 million of Risk Finance State Aid investment in the 12 months ended on the date of the investment (£10 million for Knowledge Intensive Companies);
• (j) no investment can be made by the Venture Capital Trust into a company which causes that company to receive more than £12 million (£20 million for Knowledge Intensive Companies) of State Aid investment (including from VCTs) over the company's lifetime. A subsequent acquisition by the company of another company that has previously received State Aid Risk Finance can cause the lifetime limit to be exceeded;
• (k) no funds received from an investment into a company can be used to acquire shares in another company nor another existing business or trade;
• (l) no investment can be made by the Venture Capital Trust in a company whose first commercial sale was more than seven years prior to date of investment, except where previous Risk Finance State Aid was received by the company within seven years (ten years for a Knowledge Intensive Company) or where the company is entering a new product market or a new geographic market and a turnover test is satisfied;
• (m) the Venture Capital Trust must not make a non-Qualifying Investment other than those specified in section 274 ITA 2007; and
• (n) the Venture Capital Trust must not return capital to shareholders before the end of the accounting period during which the third anniversary of the application for shares occurs.

2. Qualifying Investments

A Qualifying Investment comprises shares or securities first issued to the Venture Capital Trust (including loans with a five year or greater maturity period but excluding guaranteed loans and securities) by a company satisfying the conditions set out in Chapters 3 and 4 of Part 6 of ITA 2007. The conditions are detailed, but include that the company must be a Qualifying Company (as defined below), have gross assets not exceeding £15 million immediately prior to the investment and £16 million immediately thereafter, apply the funds raised for the purposes of a qualifying trade within certain time limits, have fewer than 250 full-time equivalent employees (500 employees in the case of a Knowledge Intensive Company), and must not receive more than £5 million (£10 million for a Knowledge Intensive Company) from Venture Capital Trusts or other Risk Finance State Aid investment sources during the 12 month period which ends on the date of the Venture Capital Trust's investment. Neither the Venture Capital Trust nor any other company may control the investee company. In certain circumstances an investment in a company by a Venture Capital Trust can be split into a part which is a qualifying holding and a part which is a non-qualifying holding.

3. Qualifying Companies

A Qualifying Company must be unquoted (companies whose shares are traded on AIM or Aquis Stock Exchange are treated as unquoted companies for this purpose), meet a financial health requirement and carry on a qualifying trade. Shares in an unquoted company which subsequently becomes listed may still be regarded as a Qualifying Investment for a further five years following listing, provided all other conditions are met. The definition of a qualifying trade excludes certain activities such as dealing in property, shares or securities and the provision of financial services. The trade must be carried on by, or be intended to be carried on by the Qualifying Company or a subsidiary, which must be at least 90 per cent owned by the parent company at the time of the issue of the shares or securities to the Venture Capital Trust (and at all times thereafter). A company intending to carry on a qualifying trade must begin to trade within two years of the issue of shares or securities to the Venture Capital Trust and continue it thereafter. At least ten per cent of the Venture Capital Trust's total investment in the investee company must be in eligible shares, as described above. The company cannot receive more than £12 million (£20 million if the company is deemed to be a Knowledge Intensive Company) of Risk Finance State Aid investment (including from Venture Capital Trusts) over the company's lifetime. The company's first commercial sale must be no more than seven years (or ten years for a Knowledge Intensive Company) of the company's first commercial sale and the company is raising funds for the same business activities or where the company is entering a new product market or geographic market and a turnover test is satisfied. Funds received from an investment by a Venture Capital Trust cannot be used to acquire shares in another company nor another existing business or trade.

A Qualifying Company must have a permanent establishment in the UK, but need not be UK resident, and may have no subsidiaries other than qualifying subsidiaries which must, in most cases, be at least 51 per cent owned.

4. Recent legislative changes –

The Finance Act 2018 placed the following further restrictions on VCTs:

• For an investment to be considered as Qualifying Investments for VCT purposes HMRC will use a "principles-based approach" known as the "risk-to-capital condition" and this depends on taking a view as to whether an investment has been structured as for "capital preservation", where an investor's tax relief is likely to provide much of the return;

• loans have to be unsecured;

• the return on any loans above ten per cent are required to represent a commercial return on the principal; and

• with effect from 6 April 2019 the period of disregard for the proceeds on the disposal of a Qualifying Investment was increased from six months to twelve months.

Part 6 Financial Information on the Companies

Introduction

Audited statutory accounts of BSC for the year ended 31 March 2023, in respect of which BSC's auditors, BDO LLP, of 55 Baker Street, London W1U 7EU, a registered member firm of the Institute of Chartered Accountants in England and Wales, made an unqualified report under section 495 of the Act as appropriate, have been delivered to the Registrar of Companies and these audited statutory accounts did not contain any statements under section 498(2) or (3) of the Act. A copy of these audited statutory accounts is available at www.bscfunds.com.

Audited statutory accounts of BSC2 for the year ended 31 December 2022, in respect of which BSC2's auditors, BDO LLP, registered auditor of 55 Baker Street, London W1U 7EU, a registered member firm of the Institute of Chartered Accountants in England and Wales, made an unqualified report under section 495 of the Act, have been delivered to the Registrar of Companies and these audited statutory accounts did not contain any statements under section 498(2) or (3) of the Act. A copy of these audited statutory accounts is available at www.bscfunds.com.

Unaudited interim accounts of BSC2 for the six months ended 30 June 2023 and 30 June 2022 are available at www.bscfunds.com.

These financial statements are prepared in accordance with UK adopted international accounting standards and also contain a description of the relevant Company's financial condition, changes in financial condition and results of operations for each of the above financial years.

Historical Financial Information

Historical financial information relating to each Company on the matters referred to below is included in the published annual report and audited statutory accounts for the years stated above, and in the unaudited interim accounts of BSC2 for the periods shown above, and is incorporated by reference into this document (the pages of those accounts and interim reports that are not referred to below are not relevant to Investors and are not incorporated into and do not form part of this document).

BSC

	Audited Statutory
	Accounts for the Year Ended
	31 March 2023
Nature of information	Page No.
Financial Highlights	2
Five Year Summary	3
Your Portfolio	4
Chairman's Statement	5
Objectives and Key Policies	9
Processes and Operations	10
Key Performance Indicators	11
Investment Review	17
Risk Factors	31
Other Matters	34
Section 172 Statement	34
Directors	36

Directors' Report	37
Corporate Governance	41
Directors' Remuneration Report	49
Directors' Responsibilities Statement	52
Independent Auditors' Report	53
Statement of Comprehensive Income	60
Balance Sheet	61
Statement of Changes in Equity	62
Statement of Cash Flows	64
Notes to the Financial Statements	65
Related Party Transactions	91

BSC2

	Audited	Unaudited Interim Report Accounts for the 6 Months for the 6 Months	Unaudited Interim Report
	Statutory
	for the Year Ended	Ended	Ended
	31 December	30 June	30 June
	2022	2023	2022
Nature of information	Page No.	Page No.	Page No.
Financial Highlights	2	1	1
Five Year Summary	4	N/A	N/A
Financial Summary	N/A	2	2
The Portfolio	5	N/A	N/A
Chairman's Statement	6	3	3
Objectives and Key Policies	10	N/A	N/A
Objectives and Strategy	N/A	6	6
Processes and Operations	11	N/A	N/A
Key Performance Indicators	12	N/A	N/A
Investment Review	18	7	7
Risk Factors	32	N/A	N/A
Principal Risks and Uncertainties	N/A	14	14
Other Matters	35	N/A	N/A
Section 172 Statement	35	N/A	N/A
Directors	37	N/A	N/A
Directors' Report	38	N/A	N/A
Corporate Governance	42	N/A	N/A
Directors' Remuneration Report	49	N/A	N/A
Directors' Responsibilities Statement	52	14	14
Independent Auditors' Report	53	N/A	N/A

Statement of Comprehensive Income	60	15	15
Balance Sheet	61	16	16
Statement of Changes in Equity	62	17	17
Statement of Cash Flows	64	20	20
Notes to the Financial Statements	65	21	21
Related Party Transactions	89	N/A	N/A

Operating and financial review

BSC	Audited Statutory Accounts for the Year Ended 31 March 2023
Total Net Assets (£000)	157,032
Change in Net Asset Value (£000)	(2,502)
Net Asset Value per BSC Share (p)	83.7
Dividends paid per BSC Share (p)	8.5
Cumulative Dividends paid per BSC Share (p)	174.9

	Audited Statutory	Unaudited Interim Report Accounts for the 6 Months for the 6 Months	Unaudited Interim Report
	for the Year Ended	Ended	Ended
BSC2	31 December 2022	30 June 2023	30 June 2022
Total Net Assets (£000)	111,869	133,027	109,636
Change in Net Asset Value (£000)	24,494	21,158	22,261
Net Asset Value per BSC2 Share (p)	61.6	57.95	60.3
Dividends paid per BSC2 Share (p)	3.0	3.75	1.5
Cumulative Dividends paid per BSC2 Share (p)	81.0	84.75	79.5

A description of the changes in the performance of the Companies, both capital and revenue, and changes to their portfolios of investments:

• for the financial year ended 31 March 2023 in respect of BSC and 31 December 2022 in respect of BSC2, is set out in the sections headed "Chairman's Statement" and "Investment Review" in the published audited statutory accounts of the relevant Company for these periods; and

• for the six months ended 30 June 2023 and 30 June 2022 in respect of BSC2 is set out in the sections headed "Chairman's Statement" and "Investment Review" in the unaudited interim reports for these periods.

The investment portfolio table on page 52 of this document has been extracted without material adjustment from the first quarter results for the three months ended 30 June 2023 in the case of BSC and from the interim accounts for the six months ended 30 June 2023 in the case of BSC2.

As at 30 June 2023 BSC's unaudited Net Asset Value was 83.7 pence per BSC Share and as at 30 June 2023 BSC2's unaudited Net Asset Value was 57.95 pence per BSC2 Share. Since 30 June 2023, BSC paid an interim dividend of 2.0p per BSC Share on 28 July 2023 and BSC2 has declared a further interim dividend of 1.5p per BSC2 Share, which will be paid on 3 November 2023.

There have been no significant changes in the financial position of BSC since 30 June 2023, the date of the last unaudited published financial information of BSC.

There have been no significant changes in the financial position of BSC2 since 30 June 2023, the date of the last unaudited published financial information of BSC2.

Investment portfolio

A list of the current investments held by BSC and BSC2 as at the date of this document, the values being as at 30 June 2023 (being the latest published NAVs of the Companies), is set out below. Save as set out below, there has been no material change to the Companies investment portfolios since 30 June 2023. All the investments are in portfolio companies incorporated in the UK and none of these portfolio companies are admitted to trading on a regulated market.

			BSC		BSC2		Combined
Investee company (All in £000)	Sector	Carrying cost*	Valuation	Carrying cost*	Valuation	Carrying cost*	Valuation
Unquoted Investments
Matillion Limited	Data	1,778	24,886	1,456	21,022		3,234 45,908
Unbiased EC1 Limited	Tech-enabled Services	5,596	10,511	3,731	7,008		9,327 17,519
Outpost VFX Limited	New Media	4,500	8,680	3,000	5,786		7,500 14,466
Displayplan Holdings Limited Business Services		130	8,829	70	4,754		200 13,583
Wooshii Limited	New Media	4,644	6,981	3,096	4,654	7,740	11,635
Elucidat Ltd	Application Software	3,960	6,226	2,640	4,151		6,600 10,377
Force24 Ltd	Application Software	3,150	4,758	2,100	3,172	5,250	7,930
Vypr Validation Technologies Limited	Tech-enabled Services	3,300	4,159	2,200	2,772	5,500	6,931
ACC Aviation Group Limited	Business Services	220	4,095	145	2,741	365	6,836
Quality Clouds Limited	Cloud and DevOps	3,916	4,032	2,610	2,688	6,526	6,720
SharpCloud Software Limited Data		3,407	3,852	2,271	2,567	5,678	6,419
DrDoctor (trading as ICNH Ltd)	Application Software	3,565	3,565	2,377	2,377	5,942	5,942
Tonkotsu Limited	Retail & Brands	2,388	2,747	1,592	1,831	3,980	4,578
Relative Insight Limited	Tech-enabled Services	3,804	2,694	2,536	1,796	6,340	4,490

AutomatePro Limited	Cloud and DevOps	2,225	2,666	1,483	1,777	3,708	4,443
Workbuzz Analytics Ltd	Application Software	2,577	2,577	1,718	1,718	4,295	4,295
Traveltek Group Holdings Limited	Application Software	1,716	2,448	1,163	1,834	2,879	4,282
KeTech Enterprises Limited	Tech-enabled Services	10	2,110	10	2,110	20	4,220
Vuealta Holdings Limited	Tech-enabled Services	91	2,196	61	1,463	152	3,659
Plandek Limited	Cloud and DevOps	2,070	2,070	1,380	1,380	3,450	3,450
Largest 20 unquoted venture capital investments			53,047 110,082	35,639	77,601		88,686 187,683
Other unquoted venture capital investments		21,337	15,768	18,863	11,573		40,200 27,341
Total unquoted venture capital investments			74,384 125,850	54,502		89,174 128,886 215,024

* carrying cost is original cost less repayments and the cost of part realisations

There has been one new investment and one follow-on investment made by each of the Companies since 30 June 2023 of £2,658,000 in aggregate, in the case of BSC, and £1,772,000 in aggregate, in the case of BSC2. Brief details are given below of the new investment.

		BSC	BSC2	Combined
Investee Company (All in £000)	Sector	Carrying cost*	Carrying cost*	Carrying cost*
GEEIQ (via Checkpoint GG Limited)	Data	2,358	1,572	3,930

Realisations since 30 June 2023

There have been no realisations since 30 June 2023.

Summaries of investments

Brief details are given below of the investments which together represent 66.0 per cent of the combined investment portfolio of the Companies as at 30 June 2023. These investments represent 66.1 per cent of BSC's investment portfolio and 65.9 per cent of BSC2's investment portfolio at that date, and have been extracted from the first quarter results for BSC for the three month period ended 30 June 2023 and the unaudited interim report for the six month period ended 30 June 2023 for BSC2. All of the investments listed are invested in by both Companies.

Top 10 unquoted investments by combined value

			Audited financial information: year ended 31 December
Matillion Limited			2023 \$m	2022* \$m
Cost	£3,234,000	Revenue	83.75	57.26
Valuation	£45,908,000	LBITA		(63.70) (31.34)
Basis of valuation	Revenue Multiple	Loss before tax		(61.96) (31.60)
Equity held	5.7%	Retained losses	(130.68) (68.30)
Sector	Data	Net assets	170.35 226.96

Matillion is a leading provider of cloud-based data extraction and transformation tools. The company helps businesses interpret their data in the cloud for insight and decision making and is headquartered in Manchester with offices in Denver and Seattle.

* 13 months to 31 January 2022

			Unaudited financial information: year ended 30 September
Unbiased EC1 Limited			2022 £m	2021 £m
Cost	£9,327,000	Revenue	8.00	5.75
Valuation	£17,519,000	EBITA (LBITA)	0.29	(0.58)
Basis of valuation	Revenue Multiple	Loss before tax	(0.42)	(1.09)
Equity held	30.8%	Retained losses	(2.19)	(1.90)
Sector	Tech-enabled Services	Net assets	2.40	2.69

Unbiased is a technology-enabled marketplace that connects consumers to Independent Financial Advisers, Mortgage Brokers and Accountants. The company has a strong, well-established position and brand awareness in the IFA market with a high level of recurring subscription income from the thousands of professionals in their network. The proven UK  model is now being launched into the much larger US financial advisor market.

			Unaudited financial information: year ended 31 March
Outpost VFX Limited			2022 £m	2021 £m
Cost	£7,500,000	Revenue	19.08	7.47
Valuation	£14,466,000	LBITA	(0.02)	(1.16)
Basis of valuation	Revenue Multiple	Loss before tax	(0.41)	(1.75)
Equity held	28.9%	Retained losses	(4.03)	(3.72)
Sector	New Media	Net assets	0.89	1.20

Outpost is a visual effects firm best known for their striking environments, seamless digital makeup and photoreal creatures. The company is headquartered in Bournemouth, with studios in London, Los Angeles, Montreal and Mumbai. An impressive client list includes global streaming platforms such as Netflix, Amazon and Apple, and major Hollywood studios.

			Unaudited financial information: year ended 31 December
Displayplan Holdings Limited			2022 £m	2021 £m
Cost	£200,000	Revenue	33.23	23.62
Valuation	£13,583,000	EBITA	5.63	2.48
Basis of valuation	Earnings Multiple	Profit before tax	5.46	2.28
Equity held	34.3%	Retained profits	9.64	7.97
Sector	Business Services	Net assets	10.04	8.38

Displayplan specialises in creating and delivering permanent in-store "point of purchase" display and fixtures. It provides a complete retail display consultancy service from concept through to design, sourcing and final installation. Clients include M&S, Sainsburys and Nike.

			Unaudited financial information: year ended 31 March
Wooshii Limited			2022 £m	2021 £m
Cost	£7,740,000	Revenue	4.30	2.63
Valuation	£11,635,000	LBITA	(1.18)	(1.07)
Basis of valuation	Revenue Multiple	Loss before tax	(1.45)	(1.24)
Equity held	33.2%	Retained losses	(5.97)	(4.51)
Sector	New Media	Net liabilities	(4.06)	(2.95)

Wooshii is a global video production agency using technology to manage a geographically distributed network of creative professionals. The company offers clients the convenience and quality of a traditional video marketing agency combined with cutting edge video management tools. It has an impressive client list including Coca Cola, Google, Microsoft and Amazon. Wooshii has also developed software tools to enable its customers to extract greater value from their historic libraries.

			Audited financial information: year ended 31 December
Elucidat Ltd			2022 £m	2021 £m
Cost	£6,600,000	Revenue	5.63	5.11
Valuation	£10,377,000	LBITA	(0.84)	(0.06)
Basis of valuation	Revenue Multiple	Loss before tax	(1.27)	(0.77)
Equity held	25.1%	Retained losses	(2.79)	(1.72)
Sector	Application Software	Net assets	3.83	1.80

Elucidat provides a cloud-based e-learning authoring platform which allows its customers to drive down the cost of producing business-critical training. The company has impressive customer retention and a client list including Tesco, Target and Walmart.

			Unaudited financial information: year ended 31 December
Force24 Ltd			2022 £m	2021 £m
Cost	£5,250,000	Revenue	4.80	4.55
Valuation	£7,930,000	LBITA	(1.28)	(1.96)
Basis of valuation	Revenue Multiple	Loss before tax	(1.68)	(2.26)
Equity held	33.3%	Retained losses	(3.02)	(1.83)
Sector	Application Software	Net assets	2.25	1.97

Force24 provides cloud-based personalised marketing automation technology trusted by over 350 businesses including household brands such as Michelin, Tarmac and Children In Need.

			Unaudited financial information: year ended 31 March
Vypr Validation Technologies Limited	2022 £m	2021 £m
Cost	£5,500,000	Revenue	2.07	1.46
Valuation	£6,931,000	LBITA	(1.20)	(0.03)
Basis of valuation	Revenue Multiple	Loss before tax	(1.49)	(0.27)
Equity held	32.1%	Retained losses	(1.48)	(0.16)
Sector	Tech-enabled Services	Net assets	1.05	2.37

Vypr is a cloud-based data validation platform providing industry-leading consumer intelligence for use in all aspects of product development including packaging, pricing and naming.

ACC Aviation Group Limited			2022 £m	Audited financial information: year ended 31 December* 2021 £m
Cost	£365,000	Revenue	72.76	41.84
Valuation	£6,836,000	EBITA	2.70	0.84
Basis of valuation	Earnings Multiple	Loss before tax	(0.72)	(2.23)
Equity held	46.1%	Retained profits	8.08	9.71
Sector	Business Services	Net assets	8.10	9.73

ACC Aviation is the market leader in airline-to-airline "wet lease" brokerage and associated services. The company also provides a range of consultancy and specialist charter services to clients via its global office network. * information for NEWACC (2018) Limited shown

			Audited financial information: year ended 31 December 2022	2021
Quality Clouds Limited			£m	£m
Cost	£6,526,000	Revenue	1.59	1.04
Valuation	£6,720,000	LBITA	(2.25)	(1.50)
Basis of valuation	Revenue Multiple	Loss before tax	(2.31)	(1.61)
Equity held	22.0%	Retained losses	(6.21)	(4.14)
Sector	Cloud & DevOps	Net liabilities	(0.05)	(2.44)

Quality Clouds provides a leading SaaS tool for the control and governance of critical SaaS platforms, with a focus on ServiceNow and Salesforce. The company operates from London, Barcelona and the US, with a client list that includes BP, Linde and JP Morgan Chase.

Part 7 Additional Information on the Companies

1. Incorporation

• 1.1 BSC was incorporated and registered in England and Wales on 6 December 1995 as a public company limited by shares under the CA 1985 with registered number 03134749 (LEI: 213800QXD4A9A3GGB469).
• 1.2 BSC2 was incorporated and registered in England and Wales on 4 October 2000 as a public company limited by shares under the CA 1985 with registered number 04084003 (LEI: 213800846X6PYSUG1328).
• 1.3 On 23 February 1996 and 8 November 2000 the Registrar of Companies issued BSC and BSC2 respectively with certificates under Section 117 of the CA 1985 entitling them to commence business.
• 1.4 On 28 February 1996 and 30 June 2000 BSC gave notice, and on 3 November 2000 BSC2 gave notice, pursuant to Section 266(1) of the CA 1985, of their intention to trade as investment companies and on 25 November 1999 and 29 March 2004 BSC gave notice, and on 12 November 2004 BSC2 gave notice, pursuant to Section 266(3) of the CA 1985, that they no longer wished to be investment companies.

2. Registered Office and Principal Legislation

The registered office of the Companies is at 5th Floor, Valiant Building, 14 South Parade, Leeds LS1 5QS and they can be contacted at www.bscfunds.com or by telephone on 0113 261 6478. The information on the website does not form part of the Prospectus unless that information is incorporated by reference into the Prospectus.

The principal legislation under which the Companies operate and which governs their Shares is the Act.

3. Share and Loan Capital

• 3.1 As at 30 June 2023 (being the end of the last financial period of BSC for which unaudited financial information has been published) there were 240,787,219 issued Shares in BSC, each ranking pari passu. All of the Shares are listed on the premium segment of the Official List. BSC held an additional 22,459,730 BSC Shares in the treasury account at this date. Following the payment of the interim dividend of 2.0p per BSC Share, BSC issued 1,270,231 BSC Shares on 28 July 2023 taking the total number of issued BSC Shares to 242,057,450 as at the date of this document.
• 3.2 As at 30 June 2023 (being the end of the last financial period of BSC2 for which unaudited interim financial information has been published) there were 229,484,783 issued Shares in BSC2, each ranking pari passu. All of the Shares are listed on the premium segment of the Official List. BSC2 held an additional 19,542,723 BSC2 Shares in the treasury account at this date.
• 3.3 By ordinary and special resolutions passed by BSC on 14 September 2023, the BSC Directors were authorised in accordance with Section 551 of the Act to allot BSC Shares up to an aggregate nominal amount of £8,000,000 (representing approximately 33 per cent of the BSC Shares in issue as at 16 June 2023) and disapplied the pre-emption provisions of Section 561 of the Act in respect of any such allotment, in each case for a period expiring 15 months thereafter (unless previously revoked, varied or extended by BSC in general meeting).
• 3.4 By ordinary and special resolutions passed by BSC2 on 15 June 2023, the BSC2 Directors were authorised in accordance with Section 551 of the Act to allot BSC2 Shares up to an aggregate nominal amount of £10,000,000 (representing approximately 55 per cent of the BSC2 Shares in issue as at 20 March 2023) and disapplied the pre-emption provisions of Section 561 of the Act in respect of any such allotment, in each case for a period expiring 15 months thereafter (unless previously revoked, varied or extended by BSC2 in general meeting).
• 3.5 Immediately following the close of the Offers, assuming £90 million is raised in aggregate by the Companies under the Offers, including the over-allotment facility, at an Offer Price of 84.227 pence and 58.196 pence per Offer Share for BSC and BSC2 respectively and that New Shares are allocated 60 per cent to BSC and 40 per cent to BSC2, the issued share capital of BSC, fully paid or credited as fully paid, will be £32,862,979 divided into 328,629,787 BSC Shares (of which 22,459,730 BSC Shares are held in treasury) and the issued share capital of BSC2, fully paid or credited as fully paid, will be £31,088,756 divided into 310,887,559 BSC2 Shares (of which 19,542,723 BSC2 Shares are held in treasury). The maximum number of New Shares which may be issued by BSC and BSC2 under the Offers is 80,000,000 and 100,000,000 New Shares respectively and the maximum gross proceeds that either BSC or BSC2 can raise under the Offers is £75,000,000.
• 3.6 The maximum number of New Shares, assuming a subscription of £90 million, including the over-allotment facility, an Offer Price of 84.227 pence per Offer Share and 58.196 pence per Offer Share for BSC and BSC2 respectively and an allocation of 60 per cent to BSC and 40 per cent to BSC2, will be 64,112,607 for BSC and 61,860,053 for BSC2. This represents a dilution to existing Shareholders of 20.9 per cent in BSC and 21.2 per cent in BSC2.
• 3.7 Except for commissions paid to authorised introducers in respect of previous offers for subscription of Shares, no commissions, discounts, brokerages or other special terms have been granted by the Companies during or since the financial periods set out in Part 6.
• 3.8 No share or loan capital of the Companies is under option or has been agreed, conditionally or unconditionally, to be put under option. Other than pursuant to the Offers and under the Dividend Reinvestment Schemes, no material issue of Shares (other than to Shareholders pro rata to existing holdings) will be made within one year of the closing of the Offers without the prior approval of Shareholders in general meeting.
• 3.9 The Shares issued under the Offers will be created under the Act, issued in registered form and temporary documents of title will not be issued. The ISIN of the BSC Shares is GB0001403152. The ISIN of the BSC2 Shares is GB0005001796.

Each Company will be subject to the continuing obligations of the FCA and the London Stock Exchange with regard to the issue of securities for cash and to the provisions of section 561 of the Act (which confers on shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash) except to the extent disapplied by the Companies in general meeting.

4. Memorandum and Articles

4.1 Memorandum of Association

The memorandum of association of the Companies provide that each Company's principal object is to carry on the business of a Venture Capital Trust. The objects of the Companies are set out in full in clause 4 of their memorandum of association which are available for inspection at the address specified in paragraph 11.1 below.

4.2 Articles of Association

The Articles of each Company contain provisions, inter alia, to the following effect:

4.2.1 Voting rights

Subject to any disenfranchisement as provided in paragraph 4.2.4 below and subject to any special terms as to voting on which any shares may be issued, on a show of hands or by proxy every Member present in person (or, being a corporation, present by a duly authorised representative) shall have one vote and on a poll every Member present in person or by proxy shall have one vote for every share of which he is the holder.

4.2.2 Transfer of Shares

The Shares are in registered form and are freely transferable. All transfers of shares in certified form must be effected by a transfer in writing in any usual form or any other form approved by the Directors. The instrument of transfer of a share shall be executed by or on behalf of the transferor and, in the case of a partly paid share, by or on behalf of the transferee. All transfers of shares which are in uncertificated form may be effected by means of a relevant system. The Directors may refuse to register any transfer of a partly paid share, provided that such refusal does not prevent dealings taking place on an open and proper basis, and may also refuse to register any instrument of transfer unless:

• (a) it is duly stamped (if so required), is lodged with the Company's Registrars or at such other place as the Directors may appoint and is accompanied by the certificate for the shares to which it relates (save in the case of a transfer by a person to whom no certificate was issued) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer;
• (b) it is in respect of only one class of share; and
• (c) the transferees do not exceed four in number.

4.2.3 Dividends

The Company may in a general meeting, by ordinary resolution, declare dividends in accordance with the respective rights of the members, provided that no dividend shall be payable in excess of the amount recommended by the Directors. The Directors may pay such interim dividends as appear to them to be justified. No dividends or other monies payable in respect of a share shall bear interest as against the Company. There are no fixed dates on which entitlement to dividend arises. The Directors may with the sanction of an ordinary resolution of the Company offer the shareholders the right to elect to receive shares credited as fully paid instead of cash in respect of the whole or part of a dividend.

All dividends unclaimed for a period of 12 years after being declared or becoming due for payment shall be forfeited and shall revert to the Company.

4.2.4 Disclosure of interests in Shares

If any member or other person appearing to be interested in shares of the Company is in default in supplying within 14 days after the date of service of a notice requiring such a member or other person to supply the Company in writing all or any such information as is referred to in Section 793 of the Act, the Directors may, for such period as the default shall continue, impose restrictions upon the relevant shares.

The restrictions available are the suspension of voting or other rights conferred by membership in relation to meetings of the Company in respect of the relevant shares and, additionally, in the case of a shareholder representing at least 0.25 per cent by nominal value of any class of shares of the Company then in issue, the withholding of payment of any dividends on, and the restriction of transfer of, the relevant shares.

4.2.5 Distribution of assets on liquidation

On a winding-up any surplus assets will be divided amongst the holders of the shares according to the respective number of shares held by them and in accordance with the provisions of the Act, subject to the rights of any shares which may be issued with special rights or privileges. The Articles provide that the liquidator may, with the sanction of a special resolution and any other sanction required by the Act, divide amongst the members in specie the whole or any part of the assets of the Company in such manner as he may determine.

4.2.6 Changes in share capital

Without prejudice to any rights attached to any existing shares, any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine or, in the absence of such determination, as the Directors may determine. Subject to the Act, the Company may issue shares which are, or at the option of the Company or the holder are liable, to be redeemed.

The Company may by ordinary resolution increase its share capital, consolidate and divide all or any of its share capital into shares of larger amount, subdivide its shares or any of them into shares of smaller amount or cancel or reduce the nominal value of any shares which have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount so cancelled or the amount of the reduction.

Subject to the Act, the Company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account, and may also, subject to the Act, purchase its own shares.

4.2.7 Variation of rights

Whenever the capital of the Company is divided into different classes of shares, the rights attached to any class may (unless otherwise provided by the terms of issue of that class) be varied or abrogated with the sanction of a special resolution passed at a separate meeting of such holders.

4.2.8 Directors' interests

A Director who is in any way, directly or indirectly, interested in a transaction or arrangement with the Company shall, at a meeting of the Directors declare, in accordance with the Act, the nature of his interest.

Provided that he has declared his interest in accordance with the paragraph above, a Director may be a party to or otherwise interested in any transaction or arrangement with the Company or in which the Company is interested and may be a Director or other officer or otherwise interested in any body corporate promoted by the Company or in which the Company is otherwise interested. No Director so interested shall be accountable to the Company, by reason of his being a Director, for any benefit which he derives from such office or interest or any such transaction or arrangement.

A Director shall not vote at a meeting of the Directors in respect of a matter in which he has any material interest otherwise than by virtue of his interest in shares, debentures or other securities of, or otherwise in or through, the Company unless his interest arises only because the case falls within one or more of the specified paragraphs in the Articles.

Where proposals are under consideration concerning the appointment of two or more Directors to offices or employment with the Company or any company in which the Company is interested the proposals may be divided and considered in relation to each Director separately and (if not otherwise precluded from voting) each of the Directors concerned shall be entitled to vote and be counted in the quorum in respect of each resolution except that concerning his own appointment.

4.2.9 Remuneration of Directors

The ordinary remuneration of the Directors (other than an executive Director appointed under the Articles) shall be such amount as the Directors shall from time to time determine (provided that unless otherwise approved by the Company in general meeting the aggregate of the ordinary remuneration of the Directors of BSC2 shall not exceed £120,000 per year and the ordinary remuneration of the Directors of BSC shall not exceed £150,000 per year) to be divided among them in such proportions and manner as the Directors may determine. The Directors of the Companies shall also be paid by the Company all travelling, hotel and other expenses they may incur in attending meetings of the Directors or general meetings or otherwise in connection with the discharge of their duties.

Any Director who, by request of the Directors, performs special services or goes or resides abroad for any purposes of the Company may be paid such extra remuneration as the Directors may determine.

The emoluments and benefits of any executive Director for his services as such shall be determined by the Directors and may be of any description, including membership of any pension or life assurance scheme for employees or their dependants or, apart from membership of any such scheme, the payment of a pension or other benefits to him or his dependants on or after retirement or death.

4.2.10 Retirement of Directors

At each annual general meeting of the Company one-third of the Directors who are subject to retirement by rotation, or if their number is not three or a multiple of three, then the number nearest to but not exceeding one-third, or if their number is less than three then one of them, shall retire from office, provided that no Director shall be required to retire by rotation earlier than the third annual general meeting after the meeting at which he was elected or last elected. A Director retiring at a meeting shall retain office until the dissolution of that meeting and shall be eligible for re-election.

It is the policy of the Boards that each Director's appointment will run for a term of one year or until the following annual general meeting, at which he or she may seek re-election, but always subject to the agreement of the Board, and the performance evaluation carried out each year, that it is appropriate for the director to seek a further term.

A Director shall be capable of being appointed or reappointed a Director despite having attained the age of 70 or any other age and shall not be required to retire by reason of his or her having attained any particular age.

4.2.11 Borrowing powers

The Directors may exercise all powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital.

The Directors shall restrict the borrowings of the Company and, by the exercise of the Company's voting and other rights or powers of control over its subsidiary undertakings (if any), secure that they restrict their borrowings, so that the aggregate amount at any time outstanding in respect of money borrowed by the group, being the Company and its subsidiary undertakings for the time being (excluding intra-group borrowings), shall not without the previous sanction of an ordinary resolution of the Company exceed a sum equal to the aggregate of the amount paid up or credited as paid up on the allotted or issued share capital and the amount standing to the credit of the consolidated revenue reserves of the group as shown by the latest audited consolidated balance sheet of the group adjusted as specified in the Articles. Prior to the publication of an audited balance sheet of the Company such aggregate amount shall be limited to 90 per cent of the amount paid up or credited as paid up (whether in respect of the nominal value or premium) on the allotted or issued share capital of the Company.

4.2.12 Distribution of realised capital profits

At any time when the Company has given notice in the prescribed form (which has not been revoked) to the Registrar of Companies of its intention to carry on business as an investment company ("a Relevant Period"), distribution of the Company's capital profits (within the meaning of Section 833(2) of the Act) shall be prohibited. The Board shall establish a reserve to be called the capital reserve. During a Relevant Period, all surpluses arising from the realisation or revaluation of investments and all other monies realised on or derived from the realisation, payment off of or other dealing with any capital asset in excess of the book value thereof and all other monies which are considered by the Board to be in the nature of accretion to capital shall be credited to the capital reserve. Subject to the Act, the Board may determine whether any amount received by the Company is to be dealt with as income or capital or partly one way and partly the other. During a Relevant Period, any loss realised on the realisation or payment off of or other dealing with any investments or other capital assets and, subject to the Act, any expenses, loss or liability (or provision therefor) which the Board considers to relate to a capital item or which the Board otherwise considers appropriate to be debited to the capital reserve shall be carried to the debit of the capital reserve. During a Relevant Period, all sums carried and standing to the credit of the capital reserve may be applied for any of the purposes for which sums standing to any revenue reserve are applicable except and provided that during a Relevant Period no part of the capital reserve or any other money in the nature of accretion to capital shall be transferred to the revenue reserves of the Company or be regarded or treated as profits of the Company available for distribution (as defined by Section 829(1) of the Act) or applied in paying dividends on any shares in the Company otherwise than by way of redemption or purchase by the Company of its own shares. In periods other than a Relevant Period any amount standing to the credit of the capital reserve may be transferred to the revenue reserves of the Company or be regarded or treated as profits of the Company available for distribution or be applied in paying dividends on any shares in the Company.

4.2.13 Duration of the Companies

BSC's Articles require that at the annual general meeting of BSC held after the later of i) 31 March 2020 and ii) the fifth anniversary of the last allotment of shares (from time to time) in BSC and, if BSC has not then been wound-up or reconstructed or re-organised, at each fifth annual general meeting of BSC thereafter, the Directors shall procure that an ordinary resolution will be proposed to the effect that BSC shall continue as a Venture Capital Trust. BSC2's Articles require that at the annual general meeting of BSC2 held after the later of i) 31 December 2020 and ii) the fifth anniversary of the last allotment of shares (from time to time) in BSC2 and, if BSC2 has not then been wound-up or reconstructed or re-organised, at each fifth annual general meeting of BSC2 thereafter, the Directors shall procure that an ordinary resolution will be proposed to the effect that BSC2 shall continue as a Venture Capital Trust.

If any such further resolutions are not passed, the Directors shall draw up proposals for the voluntary liquidation, reconstruction or other reorganisation of the Company for submission to the members of the Company at a general meeting to be convened by the Directors on a date, in the case of BSC not more than six months after such annual general meeting, and in the case of BSC2 not more than four months after such annual general meeting. Implementation of the proposals will require the approval of members by special resolution.

4.2.14 General meetings

Annual general meetings shall be held at such time and place as may be determined by the Directors and not more than 15 months shall elapse between the date of one annual general meeting and that of the next. The Directors may, whenever they think fit, convene a general meeting of the Company, and general meetings shall also be convened on the requisition by members pursuant to the provisions of the Statutes. Any meeting convened under the Articles by requisitionists shall be convened in the same manner as nearly as possible as that in which meetings are to be convened by the Directors. General meetings of the Company other than annual general meetings shall be called general meetings. The Articles allow meetings of the Companies to take place, if necessary, by electronic means and at more than one location.

Annual general meetings shall be called on not less than 21 days notice in writing and general meetings shall be called on not less than 14 days notice in writing. The notice shall be exclusive of the day on which it is given and of the day of the meeting and shall specify the place, the day and hour of meeting, and in case of special business the general nature of such business. The notice shall be given to the members, other than those who, under the provisions of the Articles or the terms of issue of the shares they hold, are not entitled to receive notice from the Company, to the Directors and to the auditors. A notice calling an annual general meeting shall specify the meeting as such and the notice convening a meeting to pass a special resolution shall specify the intention to propose the resolution as such.

In every notice calling a meeting of the Company or any class of the members of the Company there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint one or more proxies to attend, to speak and vote instead of him.

If within 15 minutes from the time appointed for the meeting a quorum is not present, (or such longer time not exceeding one hour as the Chairman of the meeting may decide to wait) the meeting, if convened by or upon the requisition of members, shall be dissolved. In any other case it shall stand adjourned to the same place and time one week later or to such day and such time (being not more than 28 days hence) and at such place as the Directors shall determine. At any such adjourned meeting if a quorum is not present within 15 minutes from the time appointed for the meeting the member or members present in person or by proxy and entitled to vote shall be a quorum and have power to decide upon all matters which could properly have been disposed of at the meeting from which the adjournment took place. If the meeting is adjourned for 14 days or more the Company shall give not less than five days' notice thereof by advertisement in one national newspaper, but no other notice shall be required.

The Chairman may, with the consent of the meeting (and shall, if so directed by the meeting) adjourn any meeting from time to time and from place to place. No business shall be transacted at any adjourned meeting other than the business left unfinished and which might properly have been transacted at the meeting from which the adjournment took place. When a meeting is adjourned for 30 days or more (otherwise than due to the absence of a quorum) or without a time and place for the adjourned meeting being fixed at least seven clear days' notice of the adjourned meeting shall be given in the same manner as in the case of the original meeting.

5. Directors' and other interests in the Companies

• 5.1 DTR 5 of the DTRs requires a Shareholder to notify the relevant Company of the percentage of its shares they hold if such percentage reaches, exceeds or falls below 3 per cent or subsequent 1 per cent thresholds. The relevant Company will make such information public through a Regulatory Information Service. Neither Company is aware of any person who, as at the date of this document and immediately following the issue of the New Shares, (assuming full subscription under the Offers, including the overallotment facility) is or will, directly or indirectly, be interested in 3 per cent or more of the issued share capital of either Company. Further, as at the date of this document and immediately following the issue of such New Shares, (assuming gross proceeds of £90 million, including the over-allotment facility, are raised under the Offers at an Offer Price of 84.227 pence for BSC and 58.196 pence for BSC2 and that New Shares are allocated 60 per cent to BSC and 40 per cent to BSC2), neither Company is aware of any person who, directly or indirectly, jointly or severally, exercises or could exercise control over it.
• 5.2 The interests of the Directors and their immediate families in the voting share capital of the Company of which they are a director, all of which are beneficial, as at the date of this document, and of connected persons, are set out below together with the percentages which such interests represent of the Ordinary Shares in issue at the date of this document:

	Name	Number of Shares	% of issued voting share capital
BSC	Rupert Cook	222,666	0.09%
	Adam Bastin	13,247	0.01%
	Jonathan Cartwright	26,494	0.01%
	Purvi Sapre	7,028	0.00%
BSC2	Peter Waller	63,811	0.03%
	Barbara Anderson	485,740	0.21%
	Roger McDowell	751,244	0.33%

5.3 The interests of the Directors and their immediate families in the voting share capital of the Company of which they are a director, all of which are beneficial, and of connected persons, following the Offers (assuming gross proceeds of £90 million, including the over-allotment facility, are raised under the Offers at an Indicative Offer Price for BSC of 84.227 pence and 58.196 pence for BSC2 and that Offer Shares are allocated 60 per cent to BSC and 40 per cent to BSC2) will be as follows:

	Name	Number of Shares	% of issued voting share capital
BSC	Rupert Cook	222,666	0.07%
	Adam Bastin	13,247	0.00%
	Jonathan Cartwright	26,494	0.01%
	Purvi Sapre	7,028	0.00%
BSC2	Peter Waller	74,120	0.03%
	Barbara Anderson	526,979	0.18%
	Roger McDowell	837,160	0.29%

• 5.4 Save as disclosed in paragraphs 5.2 and 5.3, no Director, nor any person connected with any Director, has any interest in the share capital or loan capital of the Company of which they are a director, whether beneficial or non-beneficial.
• 5.5 As at the date of this document, neither YFM Equity Partners nor YFM hold any Shares in either Company.
• 5.6 So far as is known to the Companies, no interests in the Company's share capital or voting rights are notifiable under UK law or regulation.
• 5.7 No Shareholders have different voting rights to the other Shareholders.
• 5.8 No Shares are being reserved for allocation to Shareholders, Directors or employees of either Company.
• 5.9 All the Directors are non-executive and none of the Directors, therefore, has a service contract with the Company of which they are a Director, and no such contract is proposed. The services of each of the Directors are provided to the relevant Company pursuant to letters of appointment, under which they are required to devote such time to the affairs of the relevant Company as the Board reasonably requires consistent with their role as a non-executive Director. Each Director is currently entitled to receive the following annual fee, which is subject to annual review: Rupert Cook - £44,100, Adam Bastin - £27,565, Jonathan Cartwright - £27,565, Purvi Sapre - £27,565, Peter Waller - £45,000, Barbara Anderson - £28,000 and Roger McDowell - £28,000. No benefits are payable on termination.
• 5.10 No loan or guarantee has been granted or provided by either Company to any Director.
• 5.11 Except as listed in paragraph 9.15 below, none of the Directors has had any interest in any party which is related to either Company or has had any interest in any transactions since its incorporation which are or were unusual in their nature or conditions or significant to the business of that Company.

Save as disclosed in paragraph 9.15 below, there are no potential conflicts of interest between the duties of any BSC Director or the Manager to BSC and their private interests and or other duties.

Save as disclosed in paragraph 9.15 below, there are no potential conflicts of interest between the duties of any BSC2 Director or the Manager to BSC2 and their private interests and or other duties.

Save as disclosed in paragraphs 6 and 9.15 below, no Director, nor any member of the administrative, management, supervisory body or senior management of the Companies, nor the Manager has an interest in any transaction effected by either Company which is or was unusual in its nature or conditions or significant to the business of that Company.

5.12 It is anticipated that the aggregate of fees paid or to be paid to the Directors by BSC for the twelve month period ending 31 March 2024 will not exceed £126,000 and by BSC2 for the twelve month period ending 31 December 2023 will not exceed £101,000. Fees paid to the Directors of BSC for the year ended 31 March 2023 and to the Directors of BSC2 for the year ended 31 December 2022 were as follows:

	Name	Fees paid (£)
BSC	Rupert Cook*	34,825
	Adam Bastin	26,250
	Jonathan Cartwright	26,250
	Purvi Sapre**	21,606
BSC2	Peter Waller	42,084
	Barbara Anderson	26,083
	Roger McDowell	26,083

* Rupert Cook was appointed as Chair of BSC on 16 November 2022. ** Purvi Sapre was appointed a Director of BSC on 6 June 2022.

Helen Sinclair retired as a director of BSC on 16 September 2022 and received an aggregate fee of £19,438 for the year ended 31 March 2023.

• 5.13 Each Company has taken out Directors' and Officers' liability insurance for the benefit of the Directors.
• 5.14 The following are directorships (unless otherwise stated) and partnerships held by the Directors in the five years prior to the date of this document and the principal activities of the Directors outside the Companies where these are significant with respect to the relevant Company:

Current directorships / partnerships	Former directorship / partnerships
British Smaller Companies VCT plc	Krowd 9 Limited (in voluntary liquidation)
Immersive Labs Ltd	Operatix Limited
Immersive Labs Holdings Limited	Red Penguin Ventures Limited (dissolved)*
MKRC Ventures LP (Partner)	Netacea Limited
Rupert Cook Ventures Limited	Netacea Group Limited
Red Penguin Ventures Ltd	Tobit9 Ltd (dissolved)
Censornet Limited
British Smaller Companies VCT plc	DTL Data Science GP Limited
Knightly Ventures Limited	DTL (Nominee) Limited
Museum of Cambridge	Trustonic Limited
	Geomerics Limited
	Pragmatic Semiconductor Limited
	Accelerator Advisory Limited
	SeeChange Technologies Limited

BSC	Current directorships / partnerships	Former directorship / partnerships
Jonathan Cartwright	British Smaller Companies VCT plc	Blackrock Income and Growth Investment Trust plc
	Caledonia Investments plc Pension Scheme (Trustee)	Aberforth Split Level Income Trust plc
		The Income & Growth VCT plc
		Oundle School Enterprises Limited
		Tennants Consolidated Limited
		Mobeus Income & Growth 4 VCT plc
		CT UK Capital and Investment Trust plc
Purvi Sapre	British Smaller Companies VCT plc	Nil
	Combined Heat and Power Investments Limited
	EECo Biomass No.1 Limited
	EECo Data Centres No.1 Limited
	EECo Kingscourt Limited
	EECo Smithfield Limited
	EECo Wilton No.1 Limited
	Energy Efficient Global UK Project Limited
	SDCL Solar Edge Limited
	SEEIT Asia Limited
	SEEIT Holdco Limited
	SEEIT Magma Limited
	SEEIT Bloc Limited
	SEEIT UK 1 Limited
	SEEIT CPP Limited
	SEEIT Europe 2 Limited
	Zood Infrastructure Limited
	80 Copenhagen Street Limited
	Seabright Enterprise Limited
	S2S Health Limited
	SEEIT US Two Limited
	SEEIT US Limited
	SEEIT Europe Limited
	Greenland Investment Partners Limited
	EVN Group Limited
	SDCL Edge Sponsor Participation LLP

BSC2	Current directorships / partnerships	Former directorship / partnerships
Peter Charles Waller	British Smaller Companies VCT2 plc
	KeyPoint Technologies (UK) Limited
	KeyPoint Technologies plc
	Turnberry Management Company Limited
Barbara Anderson	British Smaller Companies VCT2 plc	ReLondon
	Smart DCC Limited	The London Green Fund
	Sovereign Housing Association	Altido Limited
	Saffron Building Society	London Youth Conservatoire Ltd
	28 Bolton Gardens Management Company Limited
	British Business Bank
	Energy Saving Trust
	Crocus Home Loans Limited
	EST (Holdings) Limited
Roger McDowell	British Smaller Companies VCT2 plc	D4T4 Solutions plc
	Hargreaves Services plc	Disperse Limited
	Proteome Sciences plc	Dovehoco 201 Limited
	Brand Architekts Group plc	Augean Limited
	Avingtrans plc	Swallowfield plc
	Tribal Group plc	ThinkSmart plc
	Koheilan Limited (registered in Malta)
	Flowtech Fluidpower plc

* prior to being dissolved these companies were in voluntary liquidation

• 5.15 None of the Directors has:
  • 5.15.1 any convictions in relation to fraudulent offences in the previous five years; or
  • 5.15.2 been a member of the administrative, management or supervisory bodies or senior manager of a company or partnership associated with any bankruptcy, receivership or, save as set out in paragraph 5.14, liquidation within the previous five years; or
  • 5.15.3 been subject to any official public incrimination and/or sanctions by any statutory or regulatory authority (including recognised or designated professional bodies) or been disqualified by a court from acting as a director or member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of any company for the previous five years.
• 5.16 None of the service providers to BSC have any material potential conflicts of interest as between their duty to BSC and duties owed by them to third parties and their other interests.

None of the service providers to BSC2 have any material potential conflicts of interest as between their duty to BSC2 and duties owed by them to third parties and their other interests.

5.17 There are no amounts set aside or accrued by either Company to provide pension, retirement or similar benefits to the Directors or directors of the Manager.

6. Material contracts

The following are the summaries of the principal contents of contracts, not being contracts entered into in the ordinary course of business, which have been entered into by the Companies within two years immediately preceding the publication of this document or which contain any provisions under which the Companies have any obligation or entitlement which is material to them as at the date of this document:

The Companies

• 6.1 An offer agreement dated 20 September 2023 ("the Offer Agreement") between the Companies (1), the Directors (2), the Manager (3) and Howard Kennedy (4) under which the Manager has undertaken, as agent of the Companies, to use its reasonable endeavours to procure Applicants under the Offers and Howard Kennedy has agreed to act as sponsor to the Offers. Pursuant to the Offer Agreement the Initial Application Fee is 3 per cent of the Application Amount, or 3.5 per cent for Applications received from Applicants who have not invested their money through an Intermediary/Financial Adviser and have invested directly into the Companies, and is paid by the relevant Company to the Manager, in consideration for which the Manager has agreed to meet the costs associated with the Offers, save for commissions payable to execution only brokers, on behalf of the Companies. As is usual in contracts of this type, the Manager agreed to indemnify the Companies against the costs of the Offers (excluding trail commission) exceeding 3 per cent of the Application Amount. Under the Offer Agreement, which may be terminated by the Companies, the Directors and the Manager in certain circumstances, warranties have been given by the Companies, the Directors and the Manager to the other parties, subject to certain limitations. The warranties are in the usual form for a contract of this type.
• 6.2 An offer agreement dated 30 November 2022 (the "2022 Offer Agreement") between the Companies (1), the Directors (2), the Manager (3) and Howard Kennedy (4) under which the Manager has undertaken, as agent of the Companies, to use its reasonable endeavours to procure applicants under the offers for subscription that were launched by the Companies on 30 November 2022 (the "2022 Offers") and Howard Kennedy has agreed to act as sponsor to the 2022 Offers. Pursuant to the 2022 Offer Agreement an initial application fee of 3 per cent of the application amount, or 3.5 per cent for applications received from applicants who did not invest their money through an Intermediary/Financial Adviser and who invested directly into the Companies, was paid by the relevant Company to the Manager, in consideration for which the Manager agreed to meet the costs associated with the 2022 Offers, save for commissions payable to execution only brokers, on behalf of the Companies. As is usual in contracts of this type, the Manager agreed to indemnify the Companies against the costs of the 2022 Offers (excluding trail commission) exceeding 3 per cent of the application amount. Under the 2022 Offer Agreement, which could be terminated by the Companies, the Directors and the Manager in certain circumstances, warranties were given by the Companies, the Directors and the Manager to the other parties, subject to certain limitations. The warranties were in the usual form for a contract of this type.
• 6.3 An offer agreement dated 22 September 2021 (the "2021 Offer Agreement") between the Companies (1), the Directors (2), the Manager (3) and Howard Kennedy (4) under which the Manager undertook, as agent of the Companies, to use its reasonable endeavours to procure Applicants under the offers for subscription that were launched by the Companies on 21 September 2021 (the "2021 Offers") and Howard Kennedy agreed to act as sponsor to the 2021 Offers. Pursuant to the 2021 Offer Agreement an initial application fee was 3 per cent of the application amount, or 3.5 per cent for applications received from applicants who did not invest their money through an Intermediary/Financial Adviser and who invested directly into the Companies, was paid by the relevant Company to the Manager, in consideration for which the Manager agreed to meet the costs associated with the 2021 Offers, save for commissions payable to execution only brokers, on behalf of the Companies. As is usual in contracts of this type, the Manager agreed to indemnify the Companies against the costs of the 2021 Offers (excluding trail commission) exceeding 3 per cent of the application amount. Under the 2021 Offer Agreement, which could be terminated by the Companies, the Directors and the Manager in certain circumstances, warranties were given by the Companies, the Directors and the Manager to the other parties, subject to certain limitations. The warranties were in the usual form for a contract of this type.

BSC

6.4 An administration and investment advisory agreement dated 28 February 1996 between BSC and YFM Private Equity (the "IAA"), as varied by deeds of variation dated 1 July 2009, 16 November 2012, 17 October 2014, 24 August 2015 and 18 November 2019, pursuant to which YFM Private Equity agreed to provide administrative, company secretarial and investment advisory services to BSC in relation to BSC's qualifying portfolio. The IAA took effect on 4 April 1996 for an initial period of three years and thereafter is terminable by either party on not less than 12 months' notice or, inter alia, on the others' breach or insolvency.

Pursuant to the IAA, the Manager receives an annual fee of 1.0 per cent on all surplus cash, defined as all cash above £7.5 million. The annual fee on all other assets is 2.0 per cent per annum. This is calculated half yearly at 31 March and 30 September. The annual fee for the twelve months to 31 March 2023 was £2,782,000, equal to 1.7 per cent of the average NAV.

The Manager receives an annual accounting and secretarial fee, index linked to RPI, which is currently £85,000. The annual fee for the twelve months to 31 March 2023 was £75,000, equal to 0.48 per cent of the average NAV.

Under the IAA the Manager is entitled to receive advisory fees in connection with new investments which are paid by BSC. There is an aggregate annual cap applied to these fees for new investments of 3 per cent and for further investments of 2 per cent, with any fees above this cap being payable to BSC. Where expenses have been incurred and the investment does not proceed, the Manager pays any abort fees. The Manager also receives monitoring or non-executive director fees from unquoted portfolio companies. These fees are capped at a maximum of £40,000 per annum for an unquoted company.

The FCA classifies BSC as an alternative investment fund ("AIF"); BSC must have a single alternative investment fund manager (an "AIFM") responsible for providing, at a minimum, portfolio management and risk management services, to one or more AIFs, with this being its regular business (irrespective of where the AIFs are located or what legal form the AIF takes). The Manager is BSC's AIFM.

The AIFM Directive provides two regimes, a lighter regime for AIFMs where the cumulative assets of the AIFs under its management do not exceed €100 million; or do not exceed €500 million where the AIFs are unleveraged and do not give their investors a right of redemption within five years of initial investment.

In April 2023 the Manager exceeded this threshold and accordingly notified the FCA and applied for full authorisation as an AIFM under the AIFMD.

The Investment Team, the investment fee and performance fee payable by BSC to the Manager will remain unchanged.

• 6.5 Pursuant to an incentive agreement (the "Incentive Agreement") dated 7 July 2009, as varied by deeds of variation dated 15 August 2014, 13 October 2014 and 27 November 2018, a performance incentive fee is payable by BSC, details of which are set out on page 41.
• 6.6 Under the terms of a letter of engagement dated 26 November 2016 between BSC and Panmure Gordon (UK) Limited ("Panmure Gordon"), Panmure Gordon agreed to act as brokers to BSC, and, inter alia, to act as a market maker in the Shares of BSC and to carry out Share purchases on BSC's behalf. Panmure Gordon are entitled to receive an annual fee of £10,000, plus VAT if applicable, payable quarterly in advance on 1 January, 1 April, 1 July and 1 October. BSC indemnifies Panmure Gordon against losses arising out of Panmure Gordon's appointment except where such losses arise from Panmure Gordon's breach of agreement, negligence or wilful default.

BSC2

6.7 YFM Private Equity has acted as Manager and performed administrative and secretarial duties for BSC2 under an agreement dated 28 November 2000, superseded by an agreement dated 31 October 2005 and as varied by agreements dated 8 December 2010, 26 October 2011, 16 November 2012, 17 October 2014, 7 August 2015 and 13 November 2019 (the "IAA"). This agreement may be terminated by not less than twelve months' notice given by either party at any time.

The annual fee payable to the Manager is 1.0 per cent on all surplus cash, defined as all cash above £5 million. The annual fee on all other assets is 2.0 per cent per annum. This is calculated half yearly at 30 June and 31 December. The annual fee for the twelve months ending 31 December 2022 was £1,786,000, equal to 1.7 per cent of the average NAV.

The Manager also provides and procures the provision of secretarial and administration services to BSC2. The Manager receives an annual accounting and secretarial fee, index linked to RPI, which is currently £85,000. The annual fee for the twelve months to 31 December 2022 was £75,000, equal to 0.07 per cent of the average NAV.

Under the IAA the Manager is entitled to receive advisory fees in connection with new investments which are paid by BSC2. There is an aggregate annual cap applied to these fees for new investments of 3 per cent and for further investments of 2 per cent, with any fees above this cap being payable to BSC2. Where expenses have been incurred and the investment does not proceed, the Manager pays any abort fees. The Manager also receives monitoring or non-executive director fees from unquoted portfolio companies. These fees are capped at a maximum of £40,000 per annum for an unquoted company.

The FCA classifies BSC2 as an alternative investment fund ("AIF"); BSC2 must have a single alternative investment fund manager (an "AIFM") responsible for providing, at a minimum, portfolio management and risk management services, to one or more AIFs, with this being its regular business (irrespective of where the AIFs are located or what legal form the AIF takes). The Manager is BSC2's AIFM.

The AIFM Directive provides two regimes, a lighter regime for AIFMs where the cumulative assets of the AIFs under its management do not exceed €100 million; or do not exceed €500 million where the AIFs are unleveraged and do not give their investors a right of redemption within five years of initial investment.

In April 2023 the Manager exceeded this threshold and accordingly notified the FCA and applied for full authorisation as an AIFM under the AIFMD.

The Investment Team, the investment fee and performance fee payable by BSC2 to the Manager will remain unchanged.

• 6.8 Pursuant to a Subscription Rights Agreement dated 23 November 2001 between BSC2, YFM Private Equity Limited and Chord Capital Limited ("Chord", formerly Generics Asset Management Limited), as amended, a performance incentive fee is payable by BSC2, details of which are set out on page 42.
• 6.9 By the terms of a letter of engagement dated 26 November 2016 between BSC2 and Panmure Gordon (UK) Limited, Panmure Gordon agreed to act as brokers to BSC2, and, inter alia, to act as a market maker in the Shares of BSC2 and to carry out Share purchases on BSC2's behalf. Panmure Gordon is entitled to receive an annual fee of £10,000, plus VAT if applicable, payable quarterly in advance on 1 January, 1 April, 1 July and 1 October. BSC2 indemnifies Panmure Gordon against losses arising out of Panmure Gordon's appointment except where such losses arise from Panmure Gordon's breach of agreement, negligence or wilful default.

Depositary

6.10 Following authorisation as a full-scope AIFM the Manager is required to appoint a Depositary. A depositary agreement (the "Depositary Agreement") will be signed between the Companies, Thompson Taraz Depositary Limited (the "Depositary") and the Manager, pursuant to which the Depositary will provide cash monitoring, oversight duties including overseeing the safekeeping of the Company's investments (including all financial instruments and any other assets that the Company may invest in) as well as such other services as agreed by the parties to the Depositary Agreement (the "Services"). Pursuant to the Depositary Agreement, each Company's investments will be held in the name of the Company, or in the name of the Manager, on behalf of the Company.

The Depositary is a limited company registered in England and Wales with registration number 06043483, whose registered office is at 4th Floor, Stanhope House, 47 Park Lane, London W1K 1PR. The Depositary is authorised and regulated by the FCA in the conduct of its regulated activity. The Depositary is permitted to act as depositary of an alternative investment fund in accordance with FUND 3.11.10.

Under the Depositary Agreement, the Companies and the Manager will give certain warranties and an indemnity to the Depositary, and the Depositary will give certain warranties to the Company and the Manager, which will be in usual form for a contract of this type. The Depositary Agreement can be voluntarily terminated by the Depositary on three months' prior written notice, or six months' prior written notice in the event that the Companies require and have not appointed an alternative depositary, and by the Company or the Manager on one month's prior written notice, subject, in the case of a termination by the Depositary, to a new depositary being appointed, or earlier in certain circumstances. The fees payable to the Depositary for the Services will depend on the level of the Services to be provided and will be set out in a schedule to the Depositary Agreement.

7. CONSUMER DUTY

The Directors are cognisant of the Manager's obligations to comply with the FCA's consumer duty "Consumer Duty") rules and principles which came into force in July 2023. Firms subject to Consumer Duty must ensure that they are acting to deliver good outcomes and that this is reflected in their strategy, leadership and governance policies. The Companies are not directly captured by Consumer Duty; however, the Directors will receive updates from the Manager on how it is meeting its obligations.

8. TAKEOVERS AND MERGERS

8.1 Mandatory takeover bids

The City Code on Takeovers and Mergers (the "City Code") applies to all takeover and merger transactions in relation to the Companies, and operates principally to ensure that shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover, and that shareholders of the same class are afforded equivalent treatment. The City Code provides an orderly framework within which takeovers are conducted and the Panel on Takeovers and Mergers (the "Panel") has now been placed on a statutory footing. The Takeovers Directive was implemented in the UK in May 2006 and, since 6 April 2007, has effect through the Act.

The City Code is based upon a number of General Principles which are essentially statements of standards of commercial behaviour. General Principle One states that all holders of securities of an offeree company of the same class must be afforded equivalent treatment and, if a person acquires control of a company, the other holders of securities must be protected. This is reinforced by Rule 9 of the City Code which requires a person, together with persons acting in concert with him, who acquires shares carrying voting rights which amount to 30 per cent or more of the voting rights to make a general offer. "Voting rights" for these purposes means all the voting rights attributable to the share capital of a company which are currently exercisable at a general meeting. A general offer will also be required where a person who, together with persons acting in concert with him, holds not less than 30 per cent but not more than 50 per cent of the voting rights, acquires additional shares which increase his percentage of the voting rights. Unless the Panel consents, the offer must be made to all other shareholders, be in cash (or have a cash alternative) and cannot be conditional on anything other than the securing of acceptances which will result in the offeror and persons acting in concert with him holding shares carrying more than 50 per cent of the voting rights.

There are no current mandatory takeover bids in relation to the Companies.

8.2 Squeeze out

Section 979 of the Act provides that if, within certain time limits, an offer is made for the share capital of either Company, the offeror is entitled to acquire compulsorily any remaining shares if it has, by virtue of acceptances of the offer, acquired or unconditionally contracted to acquire not less than 90 per cent in value of the shares to which the offer relates and, in a case where the shares to which the offer relates are voting shares, not less than 90 per cent of the voting rights carried by those shares. The offeror would effect the compulsory acquisition by sending a notice to outstanding shareholders telling them that it will compulsorily acquire their shares and then, six weeks from the date of the notice, pay the consideration for the shares to the relevant company to hold on trust for the outstanding shareholders. The consideration offered to shareholders whose shares are compulsorily acquired under the Act must, in general, be the same as the consideration available under the takeover offer.

8.3 Sell out

Section 983 of the Act permits a minority shareholder to require an offeror to acquire its shares if the offeror has acquired or contracted to acquire shares in a company which amount to not less than 90 per cent in value of all the voting shares in the company and carry not less than 90 per cent of the voting rights. Certain time limits apply to this entitlement. If a shareholder exercises its rights under these provisions, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.

9. General

9.1 There have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which BSC is aware) during the previous 12 months which may have, or have had in the recent past, a significant effect on BSC's financial position or profitability.

There have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which BSC2 is aware) during the previous 12 months which may have, or have had in the recent past, a significant effect on BSC2's financial position or profitability.

• 9.2 The maximum costs and expenses of the Offers, including any irrecoverable VAT and all fees and commissions payable will amount to £2,700,000 for BSC and £1,800,000 for BSC2 assuming £90 million is raised under the Offer, including the over-allotment facility, that this is split as to 60 per cent as to BSC and 40 per cent as to BSC2 and that the costs of the Offers are 5 per cent of gross funds raised. The proceeds will be applied in accordance with each Company's investment policy. On the basis that £90 million is raised under the Offers, including the over-allotment facility, and that this is split as to 60 per cent as to BSC and 40 per cent as to BSC2 and that the costs of the Offers are 5 per cent of gross funds raised, the net proceeds will amount to £51,300,000 for BSC and £34,200,000 for BSC2. The maximum costs and expenses of the Offers will be 5 per cent of gross funds raised by each Company under the Offers.
• 9.3 BDO LLP of 55 Baker Street, London W1U 7EU was appointed as auditor to BSC and to BSC2 on 17 January 2014 and 22 August 2016 respectively. BDO LLP is a registered member firm of the Institute of Chartered Accountants in England and Wales.
• 9.4 YFM Private Equity was incorporated under the name Mosspire Limited in England on 7 October 1987 as a private company under the CA 1985. The name of Mosspire Limited was changed to Yorkshire Fund Managers Limited on 14 December 1987. The name of Yorkshire Fund Managers Limited was changed to YFM Private Equity Limited on 7 October 2004. The registered number of YFM Private Equity is 02174994 and its registered office is at 5th Floor, Valiant Building, 14 South Parade, Leeds, LS1 5QS (telephone number 0113 244 1000). YFM Private Equity is authorised and regulated by the FCA to conduct venture capital business.
• 9.5 A VCT must satisfy the FCA that its directors and any manager have sufficient and appropriate experience in the management of assets on a scale and type in which the VCT proposes to invest. The VCT's board of directors must be able to demonstrate that it will act independently of any advisers of the VCT. A majority of the board (including the Chair) must not be directors, employees, partners, officers or professional advisers of or to the manager, adviser or any other company in the same group as the manager or any investment entity managed by them. The VCT's investments must not represent more than 15 per cent by value of all its investments at the time of investment and no more than 10 per cent, in aggregate, of the value of the total assets of the VCT at the time an investment is made may be invested in other listed closed-ended investment funds, except where those funds themselves have published investment policies which permit them to invest no more than 15 per cent of their total assets in other listed closed-ended investment funds. The VCT must continue to meet the above conditions and must, at all times, invest and manage their assets in accordance with its investment policy set out in Part 4 and so as to comply with section 274 ITA. Any material change to the investment policy of either Company will only be made with Shareholder approval.
• 9.6 Howard Kennedy, sponsor to the Offers, has given and has not withdrawn its consent to the inclusion in this document of its name and the references thereto in the form and context in which they appear.
• 9.7 The statements attributed to the Manager in this document have been included in the form and context in which they appear with the consent and authorisation of the Manager. In accordance with Prospectus Regulation Rule 5.3.2R(2)(f), the Manager accepts responsibility for those statements and to the best of its knowledge the information contained in those parts of the Prospectus is in accordance with the facts and those parts of the Prospectus make no omission likely to affect their import.
• 9.8 The unaudited Net Asset Value per BSC Share as at 30 June 2023 was 83.7 pence and the unaudited Net Asset Value per BSC2 Share as at 30 June 2023 was 57.95 pence. Since 30 June 2023, BSC paid an interim dividend of 2.0p per BSC Share on 28 July 2023 and BSC2 has declared a further interim dividend of 1.5p per BSC2 Share, which will be paid on 3 November 2023.
• 9.9 BSC had available as at 30 June 2023 cash at bank of £33.6 million, money market funds of £36.3 million and £3.7 million in listed investment funds and BSC2 had available as at 30 June 2023 cash at bank of £20.1 million, money market funds of £21.8 million and £1.7 million in listed investment funds, each of which should be supplemented by the net proceeds of the Offers. (source: unaudited interim accounts prepared by the relevant Company).
• 9.10 The capitalisation of BSC as at 30 June 2023 was as follows:

Shareholders' Equity
Called up Equity Share Capital	26,325
Legal Reserve (share premium account)	40,693
Other Reserves*	81,072
Total	148,090

* excludes revenue reserve and investment holdings gains and losses reserve.

There has been no material change to BSC's capitalisation since 30 June 2023.

The capitalisation of BSC2 as at 30 June 2023 was as follows:

Shareholders' Equity	£000's
Called up Equity Share Capital	24,903
Legal Reserves (share premium account)	24,899
Other Reserves*	47,574
Total	97,376

* excludes revenue reserve and investment holdings gains and losses reserve.

There has been no material change to BSC2's capitalisation since 30 June 2023.

• 9.11 There have been no significant factors, including unusual or infrequent events or new developments, which have materially affected either Company's income from operations. There have been no governmental, economic, fiscal, monetary or political policies or factors that have materially affected either Company's operations. However, levels and bases of, and relief from, taxation are subject to change and such changes could be retrospective and could materially affect either Company's operations.
• 9.12 The Manager is responsible for the determination and calculation of each Company's Net Asset Value, which is approved by the relevant Company's Board and which the Boards intend to announce at least quarterly, through a Regulatory Information Service. The Boards believe that by announcing their Company's financial results on a regular basis, it should help to provide a fairer market price for its Shares.
• 9.13 In the opinion of BSC, its working capital is sufficient for its present requirements, that is for at least 12 months from the date of this document.
• 9.14 In the opinion of BSC2, its working capital is sufficient for its present requirements, that is for at least 12 months from the date of this document.
• 9.15 Save for the fees paid to the Directors as detailed in paragraph 5.9 above, the fees paid under the management, administration and incentive arrangements detailed in paragraphs 6.4 and 6.5 above and the offer agreement at paragraph 6.1 above, there were no other related party transactions or fees paid by BSC to a related party during the period from 31 March 2023, the date of its last published audited financial information, to the date of this document.

Save for the fees paid to the Directors as detailed in paragraph 5.9 above, the fees paid under the management, administration and incentive arrangements detailed in paragraphs 6.7 and 6.8 above, the offer agreement at paragraph 6.1 above and the irrevocable undertakings to subscribe for BSC2 Shares under the Offers that have been given by all the Directors of BSC2, there were no other related party transactions or fees paid by BSC2 to a related party during the period from 30 June 2023, the date of its last published unaudited financial information, to the date of this document.

• 9.16 The investment portfolios of the Companies are valued in accordance with the Manager's valuation policy (the "Manager's Valuation Policy"), which adheres to IFRS 13 "Fair Value Measurement" and International Private Equity and Venture Capital ("IPEVC") valuation guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward-looking estimates and judgments about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgments the valuation, which, in accordance with the IAAs summarised in paragraphs 6.4 and 6.7 of this Part 7, is undertaken by the Manager, takes into account all known material facts up to the date of approval of the financial statements by the Boards. The Manager's Valuation Policy ensures a robust and systematic approach to applying IFRS 13 and the IPEVC guidelines to mitigate any potential conflicts of interest in their preparation, insofar as the Manager receives management, administration and performance incentive fees, the quantum of which are impacted by the net asset value of the Companies. To further mitigate any potential conflicts, valuations are ultimately reviewed, challenged and subsequently approved by the Boards, all of the Directors being considered by the Boards to be independent of the Manager. The valuation of listed investments and investments traded on AIM or other public stock markets will be stated at closing bid prices. Investments not listed on a public stock market will be valued in accordance with the IPEVC valuation guidelines.
• 9.17 Investments will be valued quarterly by the Boards and these Net Asset Values will be communicated to Shareholders through the Regulatory Information Service. Each Company will also announce when there has been a major change to Net Asset Value, for instance as a result of a disposal of an investment or if that Company undertakes a fundraising and needs to announce an interim valuation. The Directors do not anticipate any circumstances arising under which the calculation of the Net Asset Value may be suspended. Any suspension will be communicated to Shareholders through the Regulatory Information Service.
• 9.18 The Boards have managed, and intend to continue to manage, the affairs of the Companies in order that they comply with the legislation applicable to VCTs. In this regard, the Companies have retained Philip Hare & Associates LLP to advise on their VCT status. The Companies have continued to conduct their affairs so as to comply with section 274 of the ITA for their current financial year and intend to continue to do so for subsequent periods. However, there can be no guarantee that VCT status will be maintained and Investors' attention is drawn to Part 5 of this Document.
• 9.19 Neither Company assumes responsibility for the withholding of tax at source.
• 9.20 All third party information in the Prospectus has been identified as such by reference to its source and in each instance has been accurately reproduced and, so far as the Companies are aware and are able to ascertain from information published by the relevant party, no facts have been omitted which would render the reproduced information inaccurate or misleading.
• 9.21 A typical investor for whom the Offers are designed is a UK income tax payer aged 18 or over, who is professionally advised, with an investment range of between £6,000 (including any Facilitated Fee) and £200,000, who may already have a portfolio of non-Venture Capital Trust investments such as unit trusts/OEICS, investment trusts and direct shareholdings in listed companies, who is willing to invest over the medium to long term and who, having regard to the risk factors set out in the Prospectus, considers the investment policy of the Companies to be attractive (that is to say an investment policy with potential returns and associated risks that may be higher than investment in the FTSE All-Share Index). This may include retail and sophisticated investors and high net-worth individuals.
• 9.22 The existing issued BSC Shares will represent 79.1 per cent of the enlarged ordinary share capital of BSC immediately following the Offers, assuming the Offers are fully subscribed in both Companies, including the over-allotment facility, with subscriptions split as to 60 per cent/40 per cent as between BSC and BSC2 respectively at an Offer Price for BSC of 84.227p, and on that basis BSC shareholders who do not subscribe under the Offers will, therefore, be diluted by 20.9 per cent.

The existing issued BSC2 Shares will represent 78.8 per cent of the enlarged ordinary share capital of BSC2 immediately following the Offers, assuming the Offers are fully subscribed in both Companies, including the over-allotment facility, with subscriptions split as to 60 per cent/40 per cent as between BSC and BSC2 respectively at an Offer Price for BSC2 of 58.196p, and on that basis BSC2 shareholders who do not subscribe under the Offers will, therefore, be diluted by 21.2 per cent.

• 9.23 The Companies and the Directors consent to the use of the Prospectus by financial Intermediaries, and accept responsibility for the content of the Prospectus, with respect to subsequent resale or final placement of securities by financial Intermediaries, from the date of the Prospectus until the close of the Offers. The deadline for receipt of Application Forms and cleared funds is 28 March 2024, and the Offers are expected to close on or before 5 April 2024. There are no conditions attaching to this consent. Financial Intermediaries may use the Prospectus only in the UK.
• 9.24 In the event of an offer being made by a financial Intermediary, the financial Intermediary will provide information to investors on the terms and conditions of the offer at the time that the offer is made. Any financial Intermediary using the Prospectus has to state on its website that it uses the Prospectus in accordance with the consent set out at paragraph 9.23 above.

10. Specific Disclosures

• 10.1 The Companies are not regulated entities. VCTs must meet a number of conditions set out in tax legislation in order for VCT tax reliefs to apply, and comply with the rules and regulations of the FCA.
• 10.2 The Boards must be able to demonstrate that they act independently of the Manager. A majority of the Board (including the Chair) must not be directors, employees, partners, officers, or professional advisers of or to, the Manager or any company in the Manager's group or any other investment entity which they manage.
• 10.3 The Manager is responsible for the determination and calculation of the NAV of the Companies on a three monthly basis, which is approved by the relevant Company's Board.
• 10.4 The valuation of the Companies' investments will be determined by the Manager, and approved by the relevant Company's Board, at least every three months and will be communicated to Shareholders through a Regulatory Information Service and made available on the Companies' website. The value of investments will be determined on a fair value basis. In the case of quoted securities, fair value is established by reference to the closing bid price on the relevant date or the last traded price, depending on the convention of the exchange on which the investment is quoted. In the case of unquoted investments, fair value is established by using measures of value such as the price of recent transactions, multiples and net assets. This is consistent with International Private Equity and Venture Capital Guidelines.
• 10.5 The calculation of the NAV per Share would only be suspended in circumstances where the underlying data necessary to value the investments of the Companies could not readily, without undue expenditure, be obtained. Details of any suspension in making such calculations would be communicated to Shareholders through a Regulatory Information Service
• 10.6 The Manager maintains professional indemnity insurance and additional own funds which are appropriate to cover potential risks arising from professional negligence as required by the FCA rules.
• 10.7 Any periodic disclosures as required by the FCA rules will be made in the quarterly communications to investors from the Manager.
• 10.8 The legal and regulatory regime to which the Companies and Manager are subject ensures the fair treatment of investors. In particular, as directors of a company incorporated in the United Kingdom, the Directors have certain statutory duties under the Companies Act with which they must comply. These include a duty upon each Director to act in the way they consider, in good faith, would be most likely to promote the success of each Company for the benefit of its members as a whole. No investor has a right to obtain preferential treatment in relation to their investment in the Companies and the Manager does not give preferential treatment to any investors.

11. Documents available for inspection

11.1 The Companies' memorandum and Articles and the Prospectus are available for inspection at the registered office of the Companies at 5th Floor, Valiant Building, 14 South Parade, Leeds LS1 5QS during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) from the date of this document until closing of the Offers and may also be inspected on the Companies' website address at www.bscfunds.com.

20 September 2023

Part 8 Definitions

In this document the following words and expressions have the following meanings:

"Act"	the Companies Act 2006, as amended from time to time;
"Admission"	the admission of the New Shares to a premium listing on the Official List and to trading on the London Stock Exchange's main market for listed securities;
"Adviser Charge(s)"	the fee(s) payable to an Intermediary, agreed with the Investor for the provision of a personal recommendation or related services in relation to an investment in New Shares, and detailed on the Application Form;
"AIM"	the Alternative Investment Market of the London Stock Exchange;
"Applicant(s)"	an Investor(s) who applies to subscribe for New Shares;
"Application"	an application for New Shares;
"Application Amount"	the total amount remitted to the Companies under the Offers, including any Facilitated Fee;
"Application Form"	form of application for New Shares, which can be found on the Companies' website;
"Articles"	the articles of association of the relevant Company (as amended from time to time);
"BSC"	British Smaller Companies VCT plc;
"BSC2"	British Smaller Companies VCT2 plc;
"Business Day"	a day (excluding Saturday and Sunday and public holidays in England and Wales) when the banks are generally open for business in London;
"CA 1985"	the Companies Act 1985, as amended from time to time;
"City" or "The City Partnership" or "Receiving Agent" or "Registrar"	The City Partnership (UK) Limited;
"Companies"	BSC and BSC2 and each a "Company";
"CREST"	relevant system (as defined in the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755)) for the paperless settlement of transfers and the holding of shares in uncertificated form which is administered by Euroclear UK & Ireland Limited (registered number 2878738);
"Dealings"	buying, selling, subscribing for or underwriting of securities in the Companies or offering or agreeing to do so, either as principal or agent;
"Directors" or "Boards"	the directors of the relevant Company at the date of this document;
"Dividend Re-investment Scheme(s)" or "DRIS" or "Schemes"	the respective dividend re-investment scheme established for each Company, the terms and conditions of which are set out in Part 9 of this document (as amended from time to time);
"DTRs"	the Disclosure and Transparency Rules made by the FCA under Part VI of FSMA;
"Election Date"	the day by which the Mandate Forms must be received by the Registrar, as announced by the Companies as the applicable deadline for the dividend concerned and expected to be at least 10 Business Days before the payment date of a dividend which is to be re-invested;

"EU MiFID II"	Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU ("MiFID") and Regulation (EU) No 600/2014 of the European Parliament and the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 ("MiFIR"), and together with MiFID, "MiFID II";
"FCA"	the Financial Conduct Authority acting in its capacity as the competent authority under the FSMA;
"Facilitated Fees"	Adviser Charges, the payment of which is facilitated by the Companies;
"Financial Adviser"	an authorised intermediary offering investment advice to his client;
"FSMA"	Financial Services and Markets Act 2000, as amended from time to time;
"Fund"	The Investment Funds sourcebook which forms part of the FCA Handbook;
"HMRC"	HM Revenue & Customs;
"Howard Kennedy"	Howard Kennedy Corporate Services LLP;
"Initial Application Fee"	the fee payable to the Manager, as set out on page 16;
"Intermediary/(ies)"	an authorised firm who signs the Application Form and whose details are set out in section 8 of that document;
"Investment Team"	those persons whose details are set out on pages 31 to 32 under the heading "The Investment Team";
"Investor(s)"	an individual(s) who subscribes for New Shares;
"ITA 2007"	Income Tax Act 2007, as amended from time to time;
"IFRS"	International Financial Reporting Standards;
"Knowledge Intensive Company"	a company satisfying the conditions in Section 331(A) of Part 6 ITA 2007;
"Listing Rules"	listing rules issued by the FCA, as amended from time to time;
"Manager" or "YFM"	YFM Private Equity Limited, registered number 02174994, in its position as the FCA authorised and regulated subsidiary of YFM Equity Partners;
"Money Laundering Regulations"	The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017;
"Net Asset Value(s)" or "NAV"	net asset value per Share;
"New Ordinary Shares"	the new Ordinary shares to be issued from time to time under the Schemes;
"New Shares"	the new Shares to be issued from time to time under the Offers;
"Offers"	the offer for subscription by the Companies for New Shares in respect of the tax year 2023/24 contained in this document;
"Offer Amount"	the total amount remitted to a Company under an Offer, including a pro rata share of any Facilitated Fee;
"Offer Price"	the subscription price of each New Share issued under the Offers as calculated in accordance with the Pricing Formula;
"Official List"	the Official List of the FCA;
"Pricing Formula"	the pricing formula relating to the Offers as set out on page 36 of this document;
"Prospectus"	this document;
"Prospectus Regulation"	Regulation (EU) 2017/1129;
"Prospectus Regulation Rules"	the Prospectus Regulation rules of the FCA;

"Qualifying Company"	an unquoted (including AIM-traded) company carrying on a qualifying trade wholly or mainly in the UK satisfying the conditions in Chapter 4 of Part 6 ITA. A summary of these requirements is given in Part 5 of the Prospectus;
"Qualifying Holdings" or "Qualifying Investments"	shares in, or securities of, a Qualifying Company held by a Venture Capital Trust which meets the requirements described in Chapter 4 of Part 6 ITA 2007;
"Qualifying Investor"	an individual who subscribes for or acquires shares in a Venture Capital Trust and satisfies the conditions of eligibility for tax relief available to investors in a Venture Capital Trust;
"RAM Capital"	RAM Capital Partners LLP;
"Registrar" or "Receiving Agent"	The City Partnership (UK) Limited;
"Regulatory Information Service" or "RIS"	a regulatory information service that is on the list of regulatory information services maintained by the FCA;
"Restricted Territories"	US, Canada, Australia, New Zealand, Japan and South Africa (and each a Restricted Territory);
"Risk Finance State Aid"	state aid received by a company as defined in Section 280B (4) of ITA;
"RPI"	the general index of retail prices published by the Office of National Statistics each month;
"Securities Act"	The United States Securities Act of 1993, as amended;
"Shareholder(s)"	holder(s) of Shares;
"Shares" or "Ordinary Shares"	ordinary shares of 10p each in the capital of the relevant Company;
"Statutes"	the "Companies Acts" as defined in Section 2 of the Act;
"Total Return"	NAV plus cumulative dividends paid;
"UK MiFID Laws"	(i) the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (SI 2017/701), The Data Reporting Services Regulations 2017 (SI 2017/699) and the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2017 (SI 2017/488), and any other implementing measure which operated to transpose EU MiFID II in to UK law before 31 January 2020 (as amended and supplemented from time to time including by: (1) Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018; (2) The Financial Regulators' Powers (Technical Standards etc.) and Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2019 (SI 2019/576); (3) The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019); and (4) The Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019; and (ii) the UK version of Regulation (EU) No 600/2014 of the European Parliament, which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time including by: (a) Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018; (b) The Financial Regulators' Powers (Technical Standards etc.) and Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2019 (SI 2019/576); (c) The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019; and (d) The Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019;

"UK PRIIPs Laws"	the UK version of the EU Packaged Retail Investment and Insurance Products Regulations which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time including by the Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019 (February 2019) and the Cross-Border Distribution of Funds, Proxy Advisors, Prospectus and Gibraltar (Amendment) (EU Exit) Regulations 2019;
"VAT"	value added tax;
"VCT" or "Venture Capital Trust"	a company which is, for the time being, approved as a venture capital trust under Section 259 of the ITA 2007;
"VCT Regulations"	Part 6 ITA 2007 and every other statute (including any orders, regulations or other subordinate legislation made under them) for the time being in force concerning Venture Capital Trusts as amended from time to time;
"YFM Equity Partners"	YFM Equity Partners LLP, registered number OC384467.

Part 9 Terms and Conditions of the Dividend Re-investment Schemes

• 1 Shareholders on the register of members of the VCTs at the close of business on the relevant Record Date may elect to receive New Ordinary Shares, credited as fully paid, instead of receiving the dividend in cash for the relevant financial period ("the full cash dividend"). The election may, subject to conditions 4(d) and 4(e) below, only be made by Shareholders in respect of the whole (and not part only) of their holding of Ordinary Shares and shall, subject to conditions 7 and 16 below, operate as a mandate in respect of all future dividends declared in respect of their Ordinary Shares after the date on which the Shareholder joins the Scheme whilst the Scheme continues to be operated by the VCTs, unless and until the Shareholder gives notice to terminate his or her participation in the Scheme in accordance with the terms of the Scheme.
• 2 Shareholders may only join the Scheme if all dividends on the Ordinary Shares registered in their name are mandated to the Scheme. Any additional Ordinary Shares which the Participating Shareholder buys, and which are registered in their name prior to the relevant Record Date for any dividend they are entitled to, will be covered by the Mandate Form they have submitted and such Participating Shareholder will receive New Ordinary Shares instead of cash dividends for their entire holding of Ordinary Shares.

If a Shareholder buys Ordinary Shares on or after the ex-dividend date for any relevant dividend, that Shareholder will not be entitled to receive that dividend in respect of those Ordinary Shares.

• 3 The VCTs shall invest the monies held within the Scheme (being dividends paid on Ordinary Shares by, or on behalf of, Participating Shareholders) in the subscription of New Ordinary Shares in the VCTs. The VCTs shall not have the discretion to vary such investments and Shareholders may not instruct the VCTs to make any other investments.
• 4 (a) On or as soon as practicable after a day on which any dividend is paid to Shareholders (a "Re-investment Day"), the funds held by the VCTs on behalf of each Participating Shareholder shall be applied on behalf of that Shareholder in the subscription for the maximum number of New Ordinary Shares as can be acquired with those funds.
• (b) The number of New Ordinary Shares issued to a Participating Shareholder pursuant to condition 4(a) above shall be calculated by dividing the aggregate value of the dividends paid on the Ordinary Shares to which the Participating Shareholder is entitled by the greater of (i) the net asset value per Ordinary Share being the most recently announced net asset value per Ordinary Share as at the date the dividend is paid (as adjusted for the relevant dividend in question if this has not already been recognised in the most recently announced net asset value); and (ii) the nominal value per Ordinary Share.
• (c) No fractions of New Ordinary Shares will be issued under the Scheme and subject to conditions 4(d) and 4(e) below the election may only be made by Shareholders in respect of the whole and not part of their shareholdings. Any balance of cash remaining with the VCTs after the subscription shall be held by the VCTs on behalf of the Participating Shareholder to whom it relates and added to the cash available in respect of that Shareholder for the subscription of New Ordinary Shares on the next Re-investment Day. No interest shall accrue or be payable by the VCTs in favour of any Shareholder on any such cash balances.
• (d) The Scheme involves the re-investment of the whole dividend paid on each shareholding each time a dividend is paid by the VCTs, together with any cash residue brought forward from the previous dividend. The Directors may, at their discretion, allow Shareholders to make a partial re-investment of dividends, where they are acting on behalf of more than one beneficial holder, for example, through a nominee shareholding made in CREST or other custodians, nominees or trustees. Please note that elections may not be made through the CREST Dividend Election Input Message. Any elections must be submitted via a mandate form or signed letter of instruction to The City Partnership. This instruction must contain the number of Ordinary Shares for which the election is being made. A cash dividend will automatically be paid on any Ordinary Shares which are not specified in a mandate form.

• (e) Shareholders holding Ordinary Shares in certificated form who might wish to make a partial election should contact The City Partnership to find out how to divide their holding so that they can make a re-investment election on the required number of Ordinary Shares.

• 5 The VCTs shall on the relevant Re-investment Day take all necessary steps to ensure that the Participating Shareholders are entered onto the share register of the VCTs as the registered holders of the New Ordinary Shares (as the case may be), issued to them under the Scheme, and that share certificates in respect of such Shares issued are posted to the Participating Shareholders at their own risk as soon as is reasonably practical. CREST members who have validly elected to receive New Ordinary Shares will have their CREST accounts credited directly with the relevant New Ordinary Shares.

• 6 To assist Participating Shareholders with their tax returns, attached to the new share certificates will be a Statement of Entitlement, or if shares are held in uncertificated form (that is CREST), a Statement of Entitlement will be sent to the Participating Shareholder's nominee separately, detailing the following:- (i) the total dividend payable; (ii) the subscription price per New Ordinary Share; (iii) the number of New Ordinary Shares allotted to a Participating Shareholder; (iv) the residual cash balance (if any) representing an entitlement to a fraction of a New Ordinary Share to be carried forward to the next dividend; and (v) the cash equivalent of the New Ordinary Shares issued, together with any such other information as shall be required under the Listing Rules of the Financial Conduct Authority.
• 7 Application to join the Scheme can be made at any time. If you hold your Shares in certificated form this can be done by returning a completed Mandate Form so as to be received by the VCTs' registrars The City Partnership, The Mending Rooms, Park Valley Mills, Meltham Road, Huddersfield HD4 7BH by no later than 5.00pm on the Election Date of a dividend which is to be re-invested. Mandate Forms received by that time on an Election Date shall be effective in relation to the dividend to which the Election Date relates and any future dividends in respect of which the Directors offer a dividend re-investment alternative. Mandate Forms received after 5.00pm on an Election Date shall not be effective in relation to the dividend to which the Election Date relates but shall be effective in respect of any future dividends in respect of which the Directors offer a dividend re-investment alternative. Please note that no acknowledgement of receipt of Mandate Forms will be issued by the VCTs or by City.

Shareholders who hold their Ordinary Shares in CREST can only elect to receive relevant dividends in the form of New Ordinary Shares by submitting their instruction via a mandate form or signed letter of instruction to The City Partnership. The instruction must be received by 5.00pm on the Election Date for the relevant dividend to be effective. Shareholders holding their Ordinary Shares through CREST should note that any election made to participate in the Scheme via a mandate instruction will only apply to the dividend in question and not to any subsequent dividends in respect of which the Directors offer a dividend re-investment alternative. Such Shareholders will need to make a separate election each time the Directors offer a dividend re-investment alternative for a particular dividend.

• 8 If, prior to the day on which the Ordinary Shares became ex-dividend, a Shareholder has sold all or some of his or her holdings in Ordinary Shares, the Shareholder should consult his or her stockbroker or agent without delay.
• 9 An application will be made to the Financial Conduct Authority for admission of the New Ordinary Shares to the Official List and to the London Stock Exchange plc for admission to trading on the London Stock Exchange plc's market for listed securities (together "Admission"). On issue, the New Ordinary Shares will rank pari passu in all respects with the existing issued Ordinary Shares and will rank so for future dividends. Subject to Admission, definitive share certificates for the New Ordinary Shares will be posted as soon as practicable following Admission at the risk of the persons entitled to them. Where New Ordinary Shares are issued as uncertificated shares, as soon as practicable following Admission, the VCTs will arrange for the relevant Participating Shareholders' stock accounts in CREST to be credited with their entitlement to New Ordinary Shares and a Statement of Entitlement (as detailed in condition 6) will be posted to their nominee. New Ordinary Shares will be allotted as and when the Directors determine it appropriate, with Admission and Dealings expected within ten Business Days of allotment.

In the event that Admission does not become effective, Mandate Forms will be disregarded in respect of the dividend and the full cash dividend will be paid as soon as possible in the usual way.

• 10 Further copies of this document and/or Mandate Forms may be obtained from The City Partnership, The Mending Rooms, Park Valley Mills, Meltham Road, Huddersfield HD4 7BH or from the VCTs' website at www.bscfunds.com.

• 11 All costs and expenses incurred in administering the Scheme will be borne by the VCTs.

• 12 Each Shareholder applying to participate in the Scheme will be deemed to warrant to the VCTs in the Mandate Form that (i) during the continuance of his or her participation in the Scheme he or she will remain the sole beneficial owner of the Ordinary Shares mandated to the Scheme free from encumbrances or security interests; and (ii) all information set out in the Mandate Form is correct and, to the extent any of the information changes, he or she will notify the changes to the VCTs.

• 13 Each Participating Shareholder acknowledges that neither the VCTs nor City nor YFM is providing a discretionary management service. Neither City, nor YFM nor the VCTs shall be responsible for any loss or damage to Participating Shareholders as a result of their participation in the Scheme unless due to the wilful negligence or default of the VCTs, its servants or agents.
• 14 The financial calendar and procedure for future dividends (and any dividend re-investment alternative offered under the Scheme) both as to any final and/or interim and/or special interim dividend will be notified in writing to Shareholders and/or published through a regulatory information service.
• 15 A Participating Shareholder who does not hold their Ordinary Shares in CREST may at any time, by giving written notice to City by 5.00pm on the Election Date prior to the relevant Re-investment Day, terminate his or her participation in the Scheme. A Participating Shareholder who holds their Ordinary Shares in CREST may cancel a mandate instruction by no later than 5.00pm on the Election Date. If a Participating Shareholder shall at any time cease to hold any Ordinary Shares in the VCTs, he or she shall be deemed to have served such a notice in respect of his or her participation in the Scheme in respect of such shares. If a Shareholder in whose name Ordinary Shares are held on behalf of a Participating Shareholder shall at any time cease to hold any such shares on behalf of that Participating Shareholder, he or she shall be deemed to have served such a notice in respect of his or her participation in the Scheme.
• 16 The VCTs shall be entitled, at any time and from time to time, to suspend the operation of the Scheme in whole or in part and/or to terminate the Scheme without notice to the Participating Shareholders. Circumstances under which the VCTs, acting by its Directors, might suspend or terminate the Scheme include, but are not limited to, changes in legislation governing Venture Capital Trusts (including changes in available tax reliefs) and adverse market conditions in the public markets. The Directors shall also be entitled, at any time and from time to time, to give each Participating Shareholder the opportunity to choose to dis-apply their mandate in respect of a particular special interim dividend, as may at any time and from time to time be declared by the VCTs, to which the Participating Shareholder is entitled, and to instead receive the full cash dividend.
• 17 All notices and instructions to be given to the VCTs shall be in writing and delivered or posted to The City Partnership, The Mending Rooms, Park Valley Mills, Meltham Road, Huddersfield HD4 7BH. Applications to participate in the Scheme will be made by way of a Mandate Form in the prescribed form (as may be amended from time to time) as provided by the VCTs.
• 18 The VCTs shall be entitled to amend the Scheme's terms and conditions on giving one month's notice in writing to all Participating Shareholders. If such amendments have arisen as a result of any change in statutory or other regulatory requirements, notice of such amendment will not be given to Participating Shareholders unless in the VCTs' opinion, the change materially affects the interests of Participating Shareholders. Amendments to the Scheme's terms and conditions which are of a formal, minor or technical nature, or made to correct a manifest error and which do not adversely affect the interests of Participating Shareholders, may be effected without notice.
• 19 By completing and delivering a Mandate Form the Participating Shareholder will (i) be deemed to have agreed to provide the VCTs with any information which it may request in connection with such application and to comply with legislation relating to Venture Capital Trusts or other relevant legislation (as the same may be amended from time to time) and (ii) be deemed to have declared that no loan has been made to the Participating Shareholder or any associate, which would not have been made, or not have been made on the same terms but for the Participating Shareholder offering to subscribe for, or acquiring, New Ordinary Shares, and that the Shares are being acquired for bona fide commercial purposes and not as part of a scheme or arrangement, the main purpose of which is the avoidance of tax.

• 20 Subscriptions for Venture Capital Trust shares only attract tax reliefs if in any tax year subscriptions to all Venture Capital Trusts do not exceed £200,000 (including subscriptions pursuant to dividend re-investment schemes). From 17 July 2014, investors can subscribe for VCT shares via a nominee and obtain income tax relief for their subscription. Participating Shareholders under the Scheme are responsible for ascertaining their own tax status and liabilities and the VCTs cannot and does not accept any liability in the event they do not receive any Venture Capital Trust tax reliefs, or such reliefs are reduced or restricted in any way.

• 21 Since dividends on Venture Capital Trust shares (including subscriptions pursuant to dividend re-investment schemes) acquired in excess of £200,000 in any tax year will not be exempted from income tax in the same way as VCT shares acquired within this limit, Participating Shareholders will generally be liable to tax on such dividends.

• 22 The election to receive New Ordinary Shares in place of the cash dividend is not being offered to, or for the benefit of, any citizen of the United States, Canada or Australia, any corporation, partnership or other entity created or organised in, or under the laws of the United States, Canada or Australia or any political sub-division thereof or with a registered office in any of these countries or any estate or trust, the income of which is subject to United States Federal, or Canadian, or Australian income taxation regardless of its source. "United States" means United States of America (including the District of Columbia). References to the United States, Canada and Australia include their territories, possessions and all areas subject to their jurisdiction.

No person receiving a copy of the Mandate Form in any territory other than the United Kingdom may treat it as constituting an invitation to him or her unless in the relevant territory such an invitation could lawfully be made to him or her without complying with any registration or other legal requirements. It is the responsibility of the Shareholder outside the United Kingdom wishing to elect to receive New Ordinary Shares to satisfy himself or herself as to the full observance of the laws of the relevant territory in connection with the offer, including obtaining any governmental or other consents which may be necessary and observing any other formalities requiring to be observed in such territory.

• 23 The VCTs shall not be required to issue New Ordinary Shares hereunder if the Directors so decide.
• 24 These Scheme terms and conditions shall be governed by, and construed in accordance with, English law and each Participating Shareholder submits to the jurisdiction of the English courts and agrees that nothing shall limit the right of the VCTs to bring any action, suit or proceeding arising out of or in connection with the Scheme in any other manner permitted by law or in any court of competent jurisdiction.

Shareholders in any doubt about their tax position should consult their independent professional adviser.

Part 10 Terms and Conditions of Application

The following Terms and Conditions apply to the Offers:

Save where the context otherwise requires, words and expressions defined in this document have the same meaning when used in the Terms and Conditions of Application, the Application Form and explanatory notes.

The "Notes on how to complete the Application Form" which can be found on the Companies' website forms part of these Terms and Conditions of Application. Please note that only Applications submitted online at www.bscfunds.com or returned by post/hand/email to the Receiving Agent will be accepted.

• 1. The contract created by the acceptance of an Application under the Offers will be conditional on Admission, unless otherwise so resolved by the Boards.
• 1. The right is reserved by the Companies to present all cheques and bankers' drafts for payment on receipt and to retain the relevant Share certificates and Application monies, pending clearance of such successful Applicants' cheques and bankers' drafts. The Companies may treat Applications as valid and binding even if not made in all respects in accordance with the prescribed instructions and the Companies may, at their discretion, accept an Application in respect of which payment is not received by the Companies prior to the closing date of the Offers. If any Application is not accepted in full or if any contract created by acceptance does not become unconditional, the Application monies or, as the case may be, the unused balance thereof in excess of £2.00 will be returned (without interest) by BACS to each relevant Applicant (or Nominee), at the risk of the person(s) entitled thereto. Balances of less than £2.00 may be retained by the Companies and used for their own purposes. In the meantime, Application monies will be retained by the Receiving Agent in a separate account. Up to £65 million of New Shares are being made available under the Offers, in aggregate, with an over-allotment facility for up to a further £25 million of New Shares, in aggregate. The maximum number of New Shares that may be issued under the Offers by BSC and BSC2 is 80,000,000 and 100,000,000 New Shares respectively and the maximum gross proceeds that either BSC or BSC2 can raise under the Offers is £75 million. The Boards reserve the right to close the Offers earlier than the closing date if fully subscribed. Applications which are accompanied by postdated cheques will not be accepted, subject to the Boards' discretion to accept such Applications. If any dispute arises as to the date or time on which an Application is received, the Boards' determinations shall be final and binding.
• 1. Subject to paragraph (4) below, no person receiving a copy of this document or any part thereof, or an Application Form, in any territory other than the UK may treat the same as constituting an invitation or offer to them, nor should they in any event use such Application Form unless, in the relevant territory, such an invitation or offer could lawfully be made to them or such Application Form could lawfully be used without contravention of any regulation or other legal requirements. It is the responsibility of any person outside the UK wishing to make an Application to satisfy themselves as to the full observation of the laws of any relevant territory in connection therewith, including obtaining any requisite governmental or other consents, observing any other formalities requiring to be observed in such territory and paying issue, transfer or other taxes required to be paid in such territory.
• 1. The New Shares have not been, nor will they be, registered in the United States under the Securities Act or under the securities laws of the Restricted Territories and they may not be offered or sold directly or indirectly within the United States or any of the Restricted Territories or to, or for the account or benefit of, US persons (as defined in Regulation S made under the Securities Act) or any national, citizen or resident of the United States or any of the Restricted Territories. The Offers are not being made, directly or indirectly, in or into the United States or any of the Restricted Territories or in any other jurisdiction where to do so would be unlawful. The distribution of this Document in jurisdictions other than the UK may be restricted by law and therefore, persons into whose possession this Document comes should inform themselves about and observe any of these restrictions. Any failure to comply with any of those restrictions may constitute a violation of the securities law of any such jurisdiction. The Application Form is not being and must not be forwarded to or transmitted in or into the United States or any Restricted Territory. No Application will be accepted if it bears an address in the United States.
• 1. Applicants will be bound by the Application(s) indicated by them on their Application Forms. Multiple Applications under the Offers are permitted. Applications under the Offers will be accepted on a "first-come, first-served" basis, subject always to the discretion of the relevant Board. For these purposes, "first-come, first served" shall be

assessed based on the date and time of receipt of a fully completed Application, subject to receipt of Application monies (in full) in cleared funds by the earlier of an Offer deadline or within five Business Days from receipt of Application to retain the Applicant's position of priority. If Application monies are not received within such time, the relevant date and time shall be when the Applicant's Application monies are received in cleared funds. An Application may not be considered as "complete" until identity verification is completed and/or, where relevant, information or supporting evidence required for the Application is no longer outstanding. The right is reserved to reject in whole or in part and scale down any Application or any part thereof including, without limitation, Applications in respect of which any verification of identity which the Companies or the Receiving Agent consider may be required for the purpose of the Money Laundering Regulations has not been satisfactorily supplied. The Boards in their absolute discretion may decide to close or suspend the Offers. The Offers shall be suspended if the issue of such New Shares in the Companies would result in a breach of the Listing Rules, the Companies not having the requisite Shareholder authorities from time to time to allot New Shares or a breach of any other statutory provision or regulation applicable to the Companies. Dealings prior to the issue of certificates for New Shares will be at the risk of Applicants. A person so dealing must recognise the risk that an Application may not have been accepted to the extent anticipated or at all.

• 1. By completing and delivering an Application Form, you confirm and warrant that you:
  2. i) offer to subscribe the monetary amount stated on the Application Form in the Companies for such number of New Shares obtained by dividing the monetary amount by the applicable Offer Prices of the New Shares resulting from the application of the Pricing Formula (as described in this document), subject to these terms and conditions of Application, and subject to the memorandum and articles of association of the relevant Company;
  3. ii) agree that, in consideration of the Companies agreeing to process your Application, your Application will not be revoked until the Offers are closed and that this paragraph shall constitute a collateral contract between you and the Companies which will become binding upon dispatch by post to, or (in the case of delivery by hand or by email or by online submission) on receipt by, the Receiving Agent of your Application Form;
  4. iii) agree and warrant that your cheque or bankers' draft may be presented for payment on receipt and will be honoured on first presentation and agree that if it is not so honoured you will not be entitled to receive a certificate in respect of the New Shares in the Companies until you make payment in cleared funds and such payment is accepted by the Companies in their absolute discretion (which acceptance shall be on the basis that you indemnify the Companies and the Receiving Agent against all costs, damages, losses, expenses and liabilities arising out of or in connection with the failure of your remittance to be honoured on first presentation), and you agree that, at any time prior to the unconditional acceptance by the Companies of such late payment, the Companies may (without prejudice to its other rights) void the agreement to allot such New Shares to you and may issue or allot such New Shares to some other person, in which case you will not be entitled to any payment in respect of such New Shares, other than the refund to you, at your risk, of the proceeds (if any) of the cheque or bankers' draft accompanying your Application Form, without interest;
  5. iv) agree that if, following the issue of all or any New Shares applied for pursuant to the Offers, your remittance is not honoured on first presentation, those New Shares may, forthwith upon payment by the Manager (or such person as it may nominate) of the Offer Price of those New Shares to the Companies, be transferred to the Manager or such other person as the Manager may direct at the relevant Offer Price per New Share and any director of the relevant Company is hereby irrevocably appointed and instructed to complete and execute all or any form(s) of transfer and/or any other documents in relation to the transfer of those New Shares to the Manager or such other person as the Manager may direct and to do all such other acts and things as may be necessary or expedient, for the purpose of or in connection with, transferring title to those New Shares to the Manager, or such other person, in which case you will not be entitled to those New Shares or any payment in respect of such New Shares;
  6. v) agree that, in respect of those New Shares for which your Application has been received and is not rejected, your Application may be accepted at the election of the Companies either by notification to the London Stock Exchange of the basis of allocation or by notification of acceptance thereof to the Receiving Agent;
  7. vi) agree that any monies refundable to you may be retained by the Companies pending clearance of your remittance and any verification of identity which is, or which the Companies or the Receiving Agent may consider to be, required for the purpose of the Money Laundering Regulations and that such monies will not bear interest;
• vii) authorise the Registrar to send Share certificate(s) or arrange for your CREST account to be credited in respect of the number of New Shares for which your Application is accepted and authorise the Companies to issue a BACS transfer for any monies returnable, at your own risk, without interest, and to procure that your name is placed on the register of members of the relevant Company in respect of such New Shares;
• viii) agree that all Applications, acceptances of Applications and contracts resulting therefrom and any noncontractual obligations arising out of or in connection with your Application shall be governed by and construed in all respects in accordance with English law and that you submit to the jurisdiction of the English courts and agree that nothing shall limit the right of the Companies to bring any action, suit or proceeding arising out of or in connection with any such Application, acceptances of Applications and contracts in any other manner permitted by law or any court of competent jurisdiction;
• ix) agree and acknowledge that you are making your Application on the basis of the information and statements concerning the Companies and the New Shares contained in this Document and that no person responsible solely or jointly for this Document or any part thereof or involved in the preparation thereof shall have any liability for any other information or representation relating to the Companies or the New Shares or for any change in the law or regulations affecting VCTs;
• x) irrevocably authorise the Receiving Agent and/or the Registrar and/or the Companies or any person authorised by any of them, as your agent, to do all things necessary to effect registration of any New Shares subscribed by or issued to you in your name and authorise any representative of the Receiving Agent or of the Registrar or of the Companies, as relevant, to execute any document required thereof;
• xi) agree that, having had the opportunity to read the document, you shall be deemed to have had notice of all information and statements concerning the Companies and the New Shares contained therein;
• xii) confirm that you are not a US person within the meaning of Regulation S made under the Securities Act or a resident of any of the Restricted Territories and that you are not applying for any New Shares with a view to their offer, sale, delivery to or for the benefit of any US Person or a resident of any of the Restricted Territories, and that you have reviewed the restrictions contained in paragraphs (3) and (4) above and warrant compliance therewith;
• xiii) declare that you are an individual aged 18 or over;
• xiv) agree that all documents in connection with the Offers and returned monies will be at your risk;
• xv) agree to the Receiving Agent, where necessary, carrying out enquiries to verify your identity to ensure compliance with the Money Laundering Regulations;
• xvi) if an Application is made direct (not through a financial Intermediary), the Companies or a third party acting on behalf of the Companies, may carry out a check of the Investor's identity using an online anti-money laundering and identity verification system.

To enable this process you may be contacted by the Receiving Agent and asked to provide evidence of your identity (typically an original or certified copy of a passport or driving licence, as well as a recent bank statement or utility bill);

• xvii) agree, on request by the Companies, YFM or the Receiving Agent, to disclose promptly in writing, any information which may be reasonably requested in connection with your Application including, without limitation, satisfactory evidence of identity to ensure compliance with the Money Laundering Regulations and authorise the Companies, YFM or the Receiving Agent to disclose any information relating to your Application as the Companies, YFM, or the Receiving Agent consider appropriate;
• xviii) agree that neither YFM nor the Receiving Agent will treat you as a customer by virtue of your Application being accepted nor owe you any duties or responsibilities concerning the price of the New Shares in the Companies or the suitability for you of New Shares or be responsible to you for providing the protections afforded to their customers;
• xix) declare that a loan has not been made to you or any associate which would not have been made, or would not have been made on the same terms, but for you offering to subscribe for, or acquiring, New Shares and that the New Shares are being acquired for bona fide commercial purpose and not as part of a scheme of arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax;
• xx) confirm and warrant that the information provided in the Application Form is true and accurate;
• xxi) have, if you sign the Application Form on behalf of somebody else, due authority to do so on behalf of that other person, and such person will also be bound accordingly and will be deemed also to have given confirmations, warranties, undertakings and authority contained herein and undertake to enclose your power of attorney or a copy thereof duly certified by a solicitor or bank with the Application Form;
• xxii) consent to the information provided on the Application Form being provided to the Receiving Agent and the Registrar to process shareholding details and send notifications to you; and
• xxiii) are not currently targeted by any form of UK, US or EU sanctions or restrictive measures including blocking; asset freezes; restrictions on dealings, issuing, or trading in debt, equity, derivatives, or other securities; or any other prohibition or restriction on exercising any rights or performing any obligations you may have in connection with any third party and that you will inform the Company and The City Partnership (UK) Limited immediately of any circumstances or changes whilst you are an Applicant or Shareholder that could impact this warranty
• 1. The Companies reserve the right to publish revised Application Forms from time to time. Applicants and their Intermediaries should, therefore, check when completing the Application Forms that no subsequent version has been published or made available by the Companies - which will be downloadable from the Companies' website at www.bscfunds.com

Manager and Service Providers

Manager

YFM Private Equity Limited

5th Floor, Valiant Building 14 South Parade Leeds LS1 5QS

Registrar

The City Partnership (UK) Limited

The Mending Rooms Park Valley Mills Meltham Road Huddersfield HD4 7BH

Receiving Agent

The City Partnership (UK) Limited

The Mending Rooms Park Valley Mills Meltham Road Huddersfield HD4 7BH

Sponsor

Howard Kennedy Corporate Services LLP No.1 London Bridge London SE1 9BG

Solicitors

Howard Kennedy LLP

No.1 London Bridge London SE1 9BG

Stockbrokers

Panmure Gordon (UK) Limited One New Change London EC4M 9AF

Financial Adviser

Brewin Dolphin Limited 34 Lisbon Street Leeds LS1 4LX

Independent Auditor

BDO LLP

55 Baker Street London W1U 7EU

VCT Status Adviser

Philip Hare & Associates LLP

6 Snow Hill London EC1A 2AY

Bankers

Santander UK plc

44 Merrion Street Leeds LS2 8JQ

Company Secretary

The City Partnership (UK) Limited

The Mending Rooms Park Valley Mills Meltham Road Huddersfield HD4 7BH

Promoter

RAM Capital Partners LLP

18 Soho Square London W1D 3QL

Depositary (to be appointed)

Thompson Taraz Depositary Limited 4th Floor, Stanhope House 47 Park Lane London W1K 1PR

British Smaller Companies VCT plc; and British Smaller Companies VCT2 plc

5th Floor, Valiant Building 14 South Parade Leeds LS1 5QS

Telephone 0113 244 1000 Email info@yfmep.com

bscfunds.com

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