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EIS Share Offer Offer documentJune 2015

Promoted by:

ChelwoodCommunity

Energy Limited

Important Notice

This document has been issued and approved by Triodos Bank NV. Triodos Bank NV (incorporated under the laws of the Netherlands with limited liability, registered in England and Wales with branch number BR3012) is authorised by the Dutch Central Bank and subject to limited regulation in the UK by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). Details about the extent of our regulation by the Financial Conduct Authority and Prudential Regulation Authority are available from us on request. Registered office: Triodos Bank NV, Deanery Road, Bristol, BS1 5AS. VAT registered number 793493383.

An investment in the withdrawable and non-transferable shares of a community benefit society is not treated as a controlled investment for the purpose of section 21 of the Financial Services and Markets Act 2000 (FSMA) (the financial promotion prohibition) pursuant to Schedule 1 paragraph 14(3) Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. These Withdrawable Shares are not a specified investment for the purpose of section 22 of FSMA pursuant to paragraph 76 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. The issue of withdrawable shares or transferable shares for the objectives of the Society exempts this document from the requirements for an approved prospectus set out in Section 85(1) of FSMA.

If you are in any doubt about the contents of this document or the action you should take, you should immediately consult a person authorised for the purposes of the Financial Services and Markets Act 2000 (as amended) who specialises in advising on the acquisition of shares and other securities.

To the best of the knowledge and belief of the Directors of Chelwood Community Energy Limited (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors, whose names appear on page 8 accept responsibility accordingly.

Chelwood Community Energy Limited

Chelwood Community Energy Limited is a Community Benefit Society, registered in England and Wales under the Co-operative and Community Benefit Societies

Act 2014, with registered office at 13 – 14 Orchard Street, Bristol, BS1 5EH (registered number RS007080).

Offer for subscription

An offer for subscription under the Enterprise Investment Scheme (EIS) of up to 2,750,000 Withdrawable Shares in the Society each with a nominal value of £1.

Promoted by:

The distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this document

comes should inform themselves about and observe any of those restrictions. Any failure to comply with any of these restrictions may constitute a violation of the

securities laws of any such jurisdiction.

Contents

Chair’s welcome ..............................................................................................2

Section 1: Key information ..........................................................................3

Section 2: Directors and advisors .......................................................... 8

Section 3: The Chelwood solar scheme ............................................ 9

Section 4: The share offer ........................................................................14

Section 5: Board of directors - biographies ..................................... 17

Section 6: Financials ...................................................................................19

Section 7: Risks ...............................................................................................21

Appendix 1: Definitions & terms ...........................................................26

Appendix 2: General information ........................................................28

Appendix 3: Taxation ................................................................................ 30

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Chair’s welcome

Dear Investors,

There is an old Punch cartoon showing the large, dirty figure of ‘King Coal’ looking down on a shining clean ‘Baby’ in a cradle labelled Electricity and saying, “I wonder what he will grow up to be?”

Well we all know that ‘Baby’ grew up to be the means of distributing the energy all of us rely upon today – we flick a switch and expect the lights to come on!

However, far from Chelwood in large industrial plants much of our electricity is still generated by old ‘King Coal’ and his cousins ‘Gas’ and ‘Oil’. Meanwhile the Government plans for a future where renewable sources of energy will replace those power stations that burn fossil fuels. Our proposal to construct a 5MW solar photovoltaic array at Chelwood supports this national effort whilst providing a secure revenue stream from the retail price index (RPI) linked Feed-In-Tariff (FIT) and payments for the units of electricity supplied to the grid. A fully costed financial model shows that loans can be repaid with interest and Community Benefit Fund payments met and original investments returned over the 25 year lifetime of this project.

To ensure the project is delivered on time and within budget and then operated efficiently, I am pleased to confirm that Chelwood Community Energy Limited has secured the services of partners with significant experience in commercial solar development and project financing.

There have been many changes in the forty years that I have lived in Chelwood but perhaps the most significant is the prospect of a project that will create an energy self-sufficient village and will generate funds to benefit the local community.

I believe this community benefit society represents an excellent long term investment in a cleaner, greener future. I urge you to read this document carefully and hope that you will join us in investing in this exciting enterprise.

Yours sincerely,

Don Weston Chairman

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Section 1: Key information

Radiant light and heat from the sun can be harnessed as energy in an ever growing number of ways, using a range of evolving technologies. The most developed and currently the most widely used of all available solar technologies is solar photovoltaic (PV), which uses solar panels to convert sunlight directly into electricity. Solar PV panels can be found in all manner of settings, from large ground-mounted arrays to just a few panels fixed to a roof.

The UK solar PV market is currently benefiting from the Feed-in-Tariff (FIT), a government initiative that sees qualifying schemes receive payment for the green electricity they generate - the FIT scheme was put in place to kick-start the industry, stimulate investment and provide the sector with the confidence to grow. Solar PV is one of the key renewable technologies in the UK’s energy mix and is growing strongly: doubling in 2014 to 5GW installed capacity1. The South West is the most productive area for solar PV, producing 521GWh of the UK’s total 2,036GWh solar electricity generated during 20132.

The number of community renewable energy projects being developed is also growing, as local people become increasingly mobilised to take ownership and control of the way electricity is generated to ensure that both the community and the local economy benefit. Community energy is very much on the agenda nationally, with the Department for Energy and Climate Change (DECC) introducing a Community Energy Strategy to support community ownership of renewable energy projects. The government sees this as a crucial component of its Electricity Market Reform, which targets 15% of the UK’s energy consumption to come from renewable sources by 2020. In keeping with the support mechanisms available for community energy projects, they are now the only type of renewable energy projects that are eligible for tax relief under the Enterprise Investment Scheme (EIS).

About Chelwood Community EnergyThe village of Chelwood has around 150 residents and is located in the Chew Valley, approximately eight miles south of Bristol and 10 miles west of Bath. Chelwood Community Energy Limited was established in February 2015 as a community benefit society, borne out of a community initiative to develop a renewable energy generating project that would bring additional benefits to the local residents.

The Chelwood solar scheme will see a 5MW ground-mounted PV panel installation constructed on 22 acres of farmland next to the village. The scheme has the overwhelming support of the community and is sensitively sited on low grade agricultural land with no adverse amenity or visual impact. It is expected to generate 4,844MWh of green electricity each year – enough to power approximately 1,160 homes3.

1 Solar photovoltaics deployment spreadsheet (May 2015), DECC

2 Regional renewable energy generation spreadsheets (2003-2013), DECC

3 Estimate based on most recent statistics from the DECC showing that annual UK average domestic household consumption is 4,170 kWh

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The project has all the required planning consents, site leasehold and grid connection agreements required for the construction and operation of the scheme and will benefit from a guaranteed 20 year index-linked income stream through the Government’s Feed-in-Tariff scheme.

The total funding requirement for the solar scheme is £5.85 million which will be financed through a combination of £3.1 million of bank debt and £2.75 million raised through this Offer. It is planned that construction will be completed (and the project will begin generating electricity) in December 2015.

As a community benefit society, all of the retained profits generated by Chelwood Community Energy Limited will be donated to a separately administered community benefit fund (the Chelwood Community Benefit Fund). Over the 25 year life of the project, the Chelwood solar scheme is projected to contribute over £1.2 million into local projects that benefit the village and the wider area. An initial £50,000 contribution will be made to the Chelwood Community Benefit Fund immediately post-commissioning, which is scheduled to be in late 2015.

The OfferThe key terms of the Offer are as follows:

Withdrawable shares issued by: Chelwood Community Energy Limited

Number of shares issued: 2,750,000

Share value: Nominal value of £1 per share

Maximum subscription: £2,750,000

Minimum subscription: £2,150,000 (Resonance Limited has agreed to provide a share underwriting facility of up to £600,000 and therefore the Minimum Subscription for the Offer is £2,150,000)

Members’ interest: 5.5% gross annual interest rate in year 1, increasing thereafter in line with the annual retail price index (RPI)

Tax relief: EIS tax relief (Advance Assurance has been given by HMRC for the Withdrawable Shares)

Total return: estimated at 9.2% gross per year including EIS tax relief (6.3% excluding EIS tax relief) and assuming long term annual inflation of 2.5% (as measured by the retail price index)

Minimum investment: £500 (500 shares) a lower minimum investment of £200 (200 shares) applies for investors who reside within a 5 mile radius of Chelwood

Maximum investment: £100,000 (100,000 shares). There is no maximum for investors that are an industrial and provident society, a cooperative society or a community benefit society.

Share class: withdrawable (investors may withdraw their share capital after a period of three years from the date of share issue, subject to Board approval and availability of funds)

Transferability: shares under this Offer are not transferable to third parties

Term: long term investment - although interest will be paid annually, repayment of capital may take up to 25 years depending on available cashflow

Voting rights: one member, one vote

EIS Tax ReliefIn February 2015, HM Revenue & Customs (HMRC) provided Advance Assurance that the Withdrawable Shares should meet the qualifying conditions of the Enterprise Investment Scheme (EIS) for the activity of constructing a 5MW solar scheme near the village of Chelwood, Bath and North East Somerset.

Investors in EIS Qualifying Companies can, depending on their individual circumstances and the Society’s compliance with rules governing EIS, enjoy some or all of the following tax advantages:

• EIS Relief (currently 30% of the amount of the investment) in the year of investment, subject to an ability to carry back relief to the immediately preceding year in certain circumstances (see Appendix 3 for more details);

• Unlimited deferral of Capital Gains Tax (CGT) from the previous three years or the subsequent 12 months;

• Income tax or CGT relief for a loss on disposal of EIS shares; and

• Inheritance tax exemption after two years.

The maximum investment by an individual in EIS qualifying shares on which EIS Relief is available is £1,000,000 in any single tax year. There is no limit on the amount of CGT which can be deferred.

The Society expects to be able to issue EIS 3 tax certificates before the end of March 2016 to enable those investors to complete their tax returns and claim their relief entitlement.

Key partners

Chelwood Community Energy Limited is supported by:4

Bath and West Community Energy: voted UK Community Energy Organisation of the Year4, BWCE have been instrumental in initiating the Chelwood solar scheme and will help manage the Chelwood Community Benefit Fund post-investment;

Solarcentury: a nationally reputed operator in the solar installation market, Solarcentury will design, construct and install the scheme and provide an ongoing operations and maintenance service post-commissioning;

Mongoose Energy: will project manage the development and commissioning process and will have an ongoing financial management and investor relations role over the project life;

4 UK Community Energy Awards, 2014

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Triodos Bank: as one of the world’s leading sustainable banks, Triodos is very experienced in securing capital for businesses whose primary purpose is to deliver positive social and environmental impact; Triodos Bank’s Corporate Finance division has been appointed as adviser to the Society and promoter of the Offer;

Ethex: Ethex, a not-for-profit web-based investment platform designed to “make positive investment easy to understand and easy to do”, will be the Receiving Agent for the Offer;

Resonance: a leading UK social investment intermediary, Resonance are providing a £600,000 share underwriting facility through the Resonance Community Share Underwriting Fund.

The role of Triodos Corporate Finance

Chelwood Community Energy Limited has appointed Triodos Corporate Finance (a division of Triodos Bank which is operated and managed independently of the Bank’s commercial lending operation) as its adviser and arranger in respect of the Offer. Triodos Corporate Finance specialises in raising capital for social and environmental businesses, including charities and social enterprises. Triodos Corporate Finance will be entitled to a success fee of £65,000, contingent on a successful capital raising.

Triodos Bank NV, which is authorised by the Dutch Central Bank and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority, is acting for the Society in connection with the arrangements set out in this document and is not acting for anyone else. It will not be responsible to anyone other than Chelwood Community Energy Limited for providing the protections offered to customers of Triodos Bank NV or for providing advice in respect of the Offer.

Key risk factors

An investment in this Offer carries risk and prospective members should read through this document carefully. The Directors consider the key risk factors to be as follows:

• Chelwood Community Energy Limited is a newly formed community benefit society and is not currently generating revenues. Investing in Chelwood Community Energy Limited shares is not the same as investing money in a bank account as your capital is at risk and you could lose up to, but no more than, your entire investment. An investment in the shares is not covered by the Financial Services Compensation Scheme (FSCS).

• The financial returns outlined in this document are dependent on the successful construction and operation of the Chelwood solar scheme.

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• The shares are not readily realisable and it is not intended that any capital will be withdrawable by Members for at least three years to ensure compliance with EIS rules. Withdrawal of shares after three years will only be possible if the company is generating sufficient surpluses and any withdrawal will be at the Board’s discretion. Investment in Chelwood Community Energy Limited is intended to be a long term investment and members should be prepared to hold their investment for the 25 year life of the project.

• Although it is the intention that the Society’s activities should qualify under the EIS, there is no guarantee that formal EIS claims will be agreed or such agreement will not subsequently be withdrawn and in those circumstances subscription monies will not be returned to Members. Returns to Members would be lower in the event that the Society fails to obtain EIS tax relief or that it is subsequently withdrawn, in which case the EIS tax reliefs referred to above would not be granted. No guarantee can be given that all investments will qualify, or continue to qualify, for EIS tax reliefs. The Society does not guarantee the availability of any form of relief under the EIS to any particular subscriber as this may depend on an individual’s personal circumstances. Members are advised to take their own taxation advice.

Investors should read all of the risk factors set out in Section 7 before participating in the Offer.

Further information & timetable

This document has been issued and approved by Triodos Bank NV. Details about the extent of Triodos’ regulation by the Financial Conduct Authority and Prudential Regulation Authority are available from us on request.

The Financial Conduct Authority recently introduced new regulations regarding the promotion of shares, bonds and debentures that are not listed on a recognised stock exchange, or part of a fund. Before you can apply for shares, we need to ask you to declare what kind of investor you are and check that you understand the nature of investment you are considering and the risks involved.

For further details about the application process please contact Ethex at [email protected] or on 01865 403 304.

If you have any questions about the terms of the Offer generally or any questions about this document, please contact Triodos Bank at [email protected] or on 0117 980 9593.

The Offer opens at 12:00 noon on Tuesday 23 June 2015 and closes at 12:00 noon on 31 July 2015 (unless the Maximum Subscription has been reached earlier or the Offer is extended by the Directors at their sole discretion).

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Section 2: Directors and advisors

Directors

David Bunker Donald Weston Edward Maxwell Jan-Willem Bode

Note: Three further directors from the local community (details included in Section 5) will be appointed at Financial Close.

Registered office

13 – 14 Orchard Street Bristol BS1 5EH

Registered number

RS007080

Promoter and advisor to the Offer

Triodos Bank NV Deanery Road Bristol BS1 5AS

0117 980 9593

Solicitors to the Offer

Michelmores LLP Woodwater House Pynes Hill Exeter EX2 5WR

Asset managers

Mongoose Energy Limited 13 – 14 Orchard Street Bristol BS1 5EH

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Section 3: The Chelwood solar scheme

Society background

Chelwood Community Energy Limited was established as a community benefit society in February 2015. The principal objectives of the society are to reduce the impact of climate change and increase energy security, generate significant community benefit, support the local economy and protect and enhance wildlife habitats and biodiversity.

The Society’s constitution is in the form of Rules registered and approved by the Financial Conduct Authority. As a community benefit society, the Society is bound to act for the benefit of the local community and, over the life of the project, the level of community contributions that are projected to be generated is significantly higher than would be offered by a commercial developer. The Society’s objects are to carry on a business that will maximise the community benefit generated from renewable energy projects developed in Chelwood and neighbouring parishes.

Chelwood Solar Limited, which currently holds the development rights to the project, will become a wholly-owned subsidiary of Chelwood Community Energy Limited upon Financial Close.

Further information about the Society and the project is available on the Society’s website at www.chelwood.org.

The Project

The Chelwood solar scheme is intended to be a 5MW ground-mounted solar PV installation, located on 22 acres of low grade agricultural land at Church Farm next to the village of Chelwood. It is expected to generate 4,844MWh of green electricity each year.

The installation is eligible for payments under the Government’s Feed-in-Tariff (FIT) scheme. The project will need to be registered with Ofgem, the UK energy regulator, by 30 June 2015 and, subject to Ofgem approval, this will fix the FIT at 6.16p/kWh. The FIT scheme guarantees an inflation linked income stream for 20 years and hence this tariff rate will increase in line with the Retail Price Index (RPI) during this period.

In addition to the FIT payments, the Society should generate revenue from the export of electricity. A suitable counterparty – likely to be Smartest Energy – will enter into a Power Purchase Agreement (PPA) with Chelwood Solar Limited. This

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is currently being negotiated and is expected to be finalised shortly. Any PPA will be with a counterparty that is satisfactory to the bank loan providers.

Environmental benefitsThe Chelwood solar scheme is expected to generate sufficient renewable energy per year to power approximately 1,160 homes5. As well as providing clean electricity and producing almost zero carbon emissions in operation, solar PV installations provide excellent opportunities for enhancing biodiversity.

Currently the installation site is considered to be of low ecological value. However, the proposed development and management plan for the site offers opportunities to deliver ecological and wider biodiversity benefits. A biodiversity management plan has been created to protect animal habitats on, and immediately adjacent to, the application site particularly for the benefit of protected species, such as great crested newts and bats.

The entire operational area of the solar scheme site is currently used as pasture comprising a meadow seed mix. This will be maintained to provide a habitat for invertebrates, mammals and ground nesting birds such as the skylark. The grassland will be grazed by sheep during autumn and early spring to minimise disturbance to reptiles and great crested newts whilst also enhancing habitat richness.

Community benefitsThe provision of significant local community benefits is central to Chelwood Community Energy Limited’s vision.

The Society will contribute surplus income into an independently administered and dedicated Chelwood Community Benefit Fund.

Over the 25-year life of the project, and based on the base case financial projections presented in Section 6, the Society expects to make contributions of £1.2 million to the Community Benefit Fund – equating to an average of £48,000 per year over the life of the project.

Annual contributions to the Community Benefit Fund may vary and will be at the discretion of the Society’s board of Directors as they will be dependent on available cashflow following bank loan repayments and members’ interest payment commitments. The targeted schedule of contributions to the Community Benefit Fund is set out below:

Date Amount

2015 £50,000 one off initial payment

2016 to 2040 £20,000 per year target minimum annual payment

2032 to 2040 up to £700,000 of additional contributions


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Chelwood

Pensford

Marksbury

CluttonBishop Sutton

Stanton Wick

Chew Magna

Compton Dando

ChewValleyLake

Bath

Bristol

Keynsham

Saltford

A37

A37 A39

A39

A368

A420

A4174

A368

A36

A37

A37A4

A4

A4

The Chelwood Solar site

The Directors expect to be in a position to significantly increase annual contributions to the Community Benefit Fund after 2032 once all bank loans have been repaid in full.

For the initial trading period, the Chelwood Community Benefit Fund will be operated as part of the Bath & West Low Carbon Community Fund, which is BWCE’s established community fund. This is administered by the Quartet Community Foundation, an independent charity providing services to charitable donors in the South West. Under this arrangement, the Chelwood Community Benefit Fund will be ring-fenced and have its own steering group, consisting of representatives of the local community together with some trustees of the Bath & West Low Carbon Community Fund. This steering group will make decisions on which local projects to support.

The Chelwood Community Benefit Fund intends to fund impactful local infrastructure projects, wildlife conservation measures and contribute to energy efficiency schemes.

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The funding requirement

The total construction cost of the scheme, including acquisition and fundraising costs, is estimated at £5.85 million which will be funded through a combination of a £3.1 million bank term loan and £2.75 million raised through the Offer.

Chelwood Solar Limited has signed heads of terms with Triodos Bank regarding a term loan of £3.1 million to part-fund the construction. Approval of this term loan is subject to commercial and technical due diligence by the bank which is currently progressing. Chelwood Community Energy Limited is targeting a simultaneous Financial Close which will see the bank loan formally approved, and issued with drawdown of funds, at the same time as the Offer closes at the end of July. At this time Chelwood Community Energy Limited will purchase Chelwood Solar Limited from its current owner, Mongoose Energy Limited, bringing the £2.75 million raised through this Offer together with the £3.1 million Triodos loan held by Chelwood Solar Limited, to make up the total £5.85 million needed.

The construction phase is contingent on the full £5.85 million being raised. Any bank debt would be repaid ahead of members’ capital.

Resonance Limited has agreed to provide a share underwriting facility of up to £600,000 should there be a shortfall in capital raised through the Offer and therefore the Minimum Subscription for the Offer is £2,150,000.

Construction and operation

All necessary planning consents, site lease and grid connection agreements have been obtained to build and operate a solar installation on the proposed site.

The project has the support of very experienced partners:

Mongoose Energy Limited mongooseenergy.coop

Mongoose Energy Limited (Mongoose) is a company that works with community groups, commercial developers and investors to identify, develop, build and manage community owned, renewable energy installations. Mongoose is the current owner of Chelwood Solar Limited, which was purchased with funding support from CO2Sense, which is a Community Interest Company and an ethical investor in renewable energy schemes.

As outlined in Appendix 2, Mongoose has agreed, under the terms of its Management Agreement with Chelwood Community Energy Limited and Development Services Agreement with Chelwood Solar Limited, to provide operational and administrative services to the project prior to Financial Close, including the provision of company secretarial and corporate governance services, and support with the negotiation of all material commercial agreements.

Post Financial Close, Mongoose will provide ongoing asset and investor management services to Chelwood Community Energy Limited over the project life. The scope

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of this service includes performance monitoring, liaison with the energy purchaser and regulatory bodies, troubleshooting, contractor liaison, bank and equity investor engagement and financial management and reporting.

Solarcentury Limited www.solarcentury.com/uk

Chelwood Solar Limited has received tenders for the supply, installation and maintenance of the scheme and has selected Solarcentury as preferred turnkey contractor based on price, quality and experience of delivering similar projects. Solarcentury is a leading UK solar company who specialise in the installation and maintenance of solar PV systems and are considered to be a strong counterparty by the Board and by Mongoose. Any counterparty will be approved by Triodos Bank, as bank loan providers.

An installation contract has been provided by Solarcentury along with an operations and maintenance contract and discussions to finalise these contracts are progressing – heads of terms have been agreed. The contract will include liquidated damages for delayed commissioning and below warranted performance. Triodos Bank are undertaking technical due diligence on the design to ensure industry standards are met.

Chelwood Community Energy Limited has also benefited from the support of:

Bath and West Community Energy www.bwce.coop

Bath and West Community Energy (BWCE) is a well-established and award-winning community benefit society that co-ordinates and develops renewable energy generating projects for the benefit of the community in Bath and the surrounding area.

BWCE has been instrumental in initiating the Chelwood solar scheme. It has a strong track record of delivering community energy projects, having managed a number of successful projects from inception, through capital raising and to completion of construction. BWCE has raised nearly £10 million through seven community share offers and has over 5.8MW of solar PV and other renewable energy projects under management, sufficient to supply the equivalent annual electricity demand for 1,750 homes6.

BWCE’s most recent project included the Wilmington Solar Array, which saw £2.2 million of equity raised to fund the construction of a 2.34MW solar scheme near Marksbury, just outside Bath.


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Section 4: The Share Offer

Chelwood Community Energy intends to raise £2.75 million through the offer of 2,750,000 non-transferable, withdrawable shares, issued at the nominal value of £1 per share.

Minimum and maximum investment

The minimum investment per investor is £500. A lower minimum investment of £200 applies for investors who reside within a 5 mile radius of Chelwood.

The maximum investment is £100,000 (100,000 shares) unless the investor is another community benefit society, a cooperative society or an industrial and provident society.

Projected member returns

As a community benefit society, Chelwood Community Energy Limited is able to pay interest to Members on their shareholdings at a rate sufficient to obtain and retain the capital required to carry out its objects and meet its business requirements.

Chelwood Community Energy Limited will pay Members a 5.5% gross annual interest rate in year 1 of operation, increasing thereafter in line with the annual Retail Price Index (RPI). Chelwood Community Energy Limited is projecting an overall return of 9.2% gross per year over the life of the project assuming the RPI is 2.5% per year and including EIS relief (6.3% per year overall return excluding EIS tax relief).

If the project performs above expectations then the additional surplus will be paid to the Chelwood Community Benefit Fund. Equally, if the project performs below expectations, payments to the Chelwood Community Benefit Fund would be reduced.

Interest on Withdrawable Shares will be calculated from the date Withdrawable Shares for this capital raising are issued and will be paid by Chelwood Community Energy Limited to Members gross (i.e. without any tax deduction) and will be paid annually, six months after the relevant Financial Year-End.

The returns described above are ultimately dependent on the successful construction and operation of the Chelwood solar scheme.

Taxation

The Offer constitutes an offer for subscription under the Enterprise Investment Scheme (EIS). Please read Appendix 3 for full details of UK tax and of EIS Tax Advantages.

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Sale or withdrawal of shares

Withdrawable Shares in Chelwood Community Energy Limited are non-transferable except on death or bankruptcy or (in the case of an unincorporated organisation or partnership) on a change of nominee, and therefore cannot be sold to a third party or traded. There is no prospect of the Withdrawable Shares being worth more than their nominal value of £1.

It is possible to withdraw shares after three years from the date of issue, giving three months’ notice. However, it is important to note that any withdrawal is at the discretion of the Directors and subject to sufficient funds being available. The Board of Chelwood Community Energy Limited has the right to change the notice period for withdrawals or to suspend withdrawals. Chelwood Community Energy Limited will not pay Members more than they paid for the Withdrawable Shares.

The Directors of the Society will generally prioritise repayment of Withdrawable Shares based on the date of receipt of notice requesting repayment. However in the event of the death of a Member, a formal request for repayment of Withdrawable Shares by a legally appointed representative of the Member’s estate will be given accelerated priority.

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Exit strategy

In principle, an investment in Chelwood Community Energy Limited is for a 25 year period, starting with the construction of the scheme, and as such should be considered a long-term investment. As above, the Withdrawable Shares are withdrawable after three years but this is at the discretion of the Directors and subject to the necessary funds being available to provide a repayment of capital. The Board of Chelwood Community Energy Limited will actively monitor refinancing opportunities after three years, which may provide an exit route but this should not be relied upon.

Voting

All Chelwood Community Energy Limited Members hold one vote regardless of the number of Withdrawable Shares held.

Conditions to the Offer

The Offer is conditional on:

• The Minimum Subscription having been met on or before 12 noon Friday 31 July 2015 (or at the date to which the Offer is extended at the sole discretion of the Board);

• A Share Purchase Agreement having been formally and unconditionally entered into such that the ownership of Chelwood Solar Limited, which holds the project development rights, will be transferred from Mongoose Energy Limited to Chelwood Community Energy Limited conditional only on the Offer closing; and

• Chelwood Solar Limited having formally entered into a £3.1 million loan agreement with Triodos Bank to part-fund the project and those funds being available for drawdown.

Funds raised through this Offer will be held by Ethex, as Receiving Agent. They will not be released to Chelwood Community Energy Limited until the three conditions above have been met to the satisfaction of Triodos Corporate Finance.

Timetable

The Offer launches at 12:00 noon on Tuesday 23 June 2015 and will close at 12:00 noon on Friday 31 July 2015, unless fully subscribed earlier or otherwise extended at the sole discretion of the Directors.

If the Offer reaches the Maximum Subscription before Friday 31 July 2015 then the Offer will close and applications will be accepted on a ‘first-come, first-served’ basis.

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Section 5: The Board of Directors

The Chelwood Community Energy Limited Board has a diverse skillset including: a track record of successfully delivering community renewable energy projects, project management expertise, electricity contracting and negotiation experience, chartered accounting and financial acumen and Chelwood community representation.

Brief profiles of the Society’s existing directors are as follows:

Donald Weston – Chair Don started his career as a Radio Officer in the Merchant Navy where he served for eight years, mainly in the Far East. On leaving the Navy, he worked as an electronic technician then spent four years reading for a degree in Electrical and Electronic Engineering at the University of Bath. Work as an Experimental Officer at the University on mobile telecommunication systems was followed by the second part of his career as a Lecturer at Brunel Technical

College and subsequently the University of the West of England specialising in embedded microprocessor systems.

Don has lived in Chelwood for forty years and has always taken an active part in the local community having served as a parish councillor, the Churchwarden of St Leonard’s church and as a member of the village hall committee since it was formed in 1981.

David Bunker – Society SecretaryDavid is a chartered accountant and member of the Academy of Experts with over 20 years’ experience in public practice. He has a long standing interest in sustainability, serving for many years as a trustee of the Centre for Sustainable Energy and is currently a director of Windcluster 2000 Limited, a Cumbrian wind farm.

Jan-Willem BodeJan-Willem has been a researcher at Utrecht University, and has a further professional career as a consultant and director for various parts of the Ecofys group, after which he founded, grew and sold the carbon credits originator OneCarbon. He went on to work for Orbeo (JV of Société Generale and Rhodia) where he developed various investor products and had joint P&L responsibility for the entire

carbon business. Investor in sustainability and internet businesses. Jan-Willem is also the managing director of Mongoose Energy.

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Edward MaxwellEd spent three years at Lackham College of Agriculture before returning to his family’s farm in Chelwood. He moved into sales of agricultural equipment in 1996 and for the past 15 years he has designed materials handling solutions for commercial property. Ed was instrumental in arranging the planning consent for the Chelwood solar scheme as well as

negotiating the connection agreement for the site.

Three further directors, all from the local community, will be appointed by the Society at Financial Close. Their brief profiles are as follows:

Peter JonesPeter lives in Chelwood and was born and brought up in the village. He has an HND in Agricultural Science and previously worked in agriculture and agriculture related businesses, spanning a six year period. Peter has been working in horticulture for the last 25 years having previously managed a successful video and photography company and a

geotechnical exploration company. Peter is an active member of the Chelwood Community and sits on the Chelwood Parish Council.

Bryan GodfreyAfter leaving the Royal Navy, Bryan ran his own company for 28 years then continued as a contracts manager for seventeen years. Having been retired for the past four years he now looks forward to being able to make a contribution to the community of Chelwood as a member of the board for Chelwood Community Energy.

Kathryn Scott

Kathryn has lived in Chelwood for 38 years and is particularly interested in local and environmental issues. She is excited by the potential that this project has to directly benefit many and varied aspects of the community and is looking forward to representing the community by serving on the board of Chelwood Community Energy.

GovernanceOnce the Chelwood solar scheme is operational, the Board will convene quarterly to monitor and appraise performance. Management information for those board meetings will be provided by Mongoose Energy Limited under the terms of its Management Services Agreement.

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Section 6: Financials

Chelwood Community Energy Limited currently generates no income as the Chelwood solar scheme is in the pre-construction phase. Generation of income from the production and export of electricity is expected to start in December 2015 following completion of construction and commissioning.

Financial projections

A summary of the Society’s post commissioning cash flow projections over the 25 year life of the project is shown below:

Chelwood Community Energy Limited Summary cashflow projections post commissioning

4 years to 31-Dec-19

£’000

5 years 31-Dec-24

£’000

5 years 31-Dec-29

£’000

5 years 31-Dec-34

£’000

5 years 31-Dec-39

£’000

Operating income - sale of electricity

Operating costs

Inverter replacement fund

Decommissioning reserve

3,026

(1,158)

(70)

-

4,091

(1,507)

(88)

-

4,825

(1,735)

(100)

-

5,367

(2,093)

-

(100)

3,742

(1,957)

-

(100)

Cashflow available for financing and community fund 1,798 2,496 2,990 3,174 1,685

Bank loan repayments

Members’ Interest payments

Members’ capital repayments

Community Fund contributions

(1,090)

(547)

-

(140)

(1,435)

(866)

(49)

(100)

(1,689)

(956)

(86)

(100)

(495)

(962)

(1,653)

(100)

-

(255)

(962)

(782)

Retained cashflow for the period 21 46 159 (36) (314)

Note: Forward-looking statements are merely unaudited projections based on a number of assumptions and should not be relied upon as indicators of future performance. There is no guarantee these projections will be achieved.

Income is derived from the sale of exported electricity as well as from payments through the Feed-in-Tariff scheme.

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Costs comprise operation and maintenance management charges from Solarcentury, insurance, rent and rates, repair provisions (e.g. for inverters) and an annual fee payable to Mongoose Energy Limited under its Management Agreement with Chelwood Community Energy Limited.

The key assumptions underlying these projections are as follows:

• Total costs to build the project are £5.85 million including acquisition, construction, fundraising and contingency costs;

• The society successfully raises the full funding requirement - £2.75 million of equity through the Offer and £3.1 million of bank debt (£5.85 million in total);

• The construction of the solar scheme is completed by December 2015;

• The solar scheme generates 4,844 MWh in its first full year of operation;

• The project is registered with Ofgem by 30 June 2015 and secures a FIT of 6.16p/kWh;

• An export tariff of 5.64p/kwh is secured from January 2016;

• Degradation in solar panel performance is at 0.5% per year in line with performance warranties; and

• The final bank loan is priced in lined with the signed heads of terms with Triodos Bank.

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Section 7: Risks

In addition to the other relevant information set out in this document the Directors feel the following are the principal risk factors relevant to investing in shares issued by the Society and should be considered carefully in evaluating whether to make an investment. If you are in any doubt about the contents of this document or the action you should take, you are strongly recommended to consult your financial or other professional adviser. The following risk factors are not exhaustive and not in any particular order of priority.

Construction phase risk

The Society’s success depends to a large extent on the successful construction of the Chelwood solar scheme to time and budget. Construction of solar installations is invariably a challenging process involving significant input by, and reliance on, contracting partners and continued compliance with planning conditions and requirements of other external agencies. In the event that any party does not perform its obligations adequately, the construction phase of the project can over-run or cost more than anticipated. This could have a significant effect on the Society’s future financial performance.

The Society has selected its construction partner carefully, taking into account their experience and track record in similar projects as well as their financial capabilities. It has also built in an appropriate contingency cost provision for unforeseen circumstances. The Society’s chosen construction partner, Solarcentury, is a leading national organisation that provides construction and maintenance services for solar installations. Moongoose Energy Limited and BWCE have engaged with Solarcentury on the construction of other solar installations. Adequate protections will be negotiated into the contract in respect of commissioning and construction delays.

The Directors are confident that construction risks can be managed.

Single project company

Chelwood Community Energy Limited was incorporated in February 2015 specifically to develop the Chelwood solar scheme and is therefore a single project company which has yet to start generating revenues. The success of the Society is therefore entirely dependent on successful construction and subsequent operation of the Chelwood solar scheme.

Chelwood Community Energy Limited’s Asset Manager, Mongoose Energy Limited, has significant experience in the development and construction of solar installations of a similar scale. The Directors are confident that the Chelwood solar scheme project has a sound business model.

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Reliance on variable resourcesClimate variability and fluctuating weather patterns could reduce the Society’s profitability since its revenues directly relate to the amount of solar energy received by the Chelwood solar scheme.

There is currently no consensus on evidence in historical records or indication from climate modelling of declining trends in average solar radiation levels.

The Society’s assumptions around potential renewable energy generation levels each year are based on site capacity and yield calculations provided by the lead construction partner. These calculations, and the solar radiation data behind them, will be reviewed and verified by external technical experts appointed by Triodos Bank as part of its due diligence process.

The returns outlined in this document are dependent on the successful construction and operation of the Chelwood solar scheme.

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Technology failure

Generation of electricity involves mechanical and electronic processes which may fail under certain conditions and lead to loss of revenues and repair or replacement costs. In order to mitigate against this the Society will use tried-and-tested technologies and equipment backed by warranty and maintenance service packages, undertake regular preventative maintenance and take out insurance in respect of business interruption caused by major equipment failure.

Fluctuating market conditions

The wholesale prices of electricity fluctuate, which will have an impact on sale prices for the Society’s exported electricity. This may lead to volatility in some of the forecast revenue streams. However, UK Government forecasts suggest that, overall, the long term trend is for wholesale electricity prices to increase.

Over 40% of the Society’s forecast income is generated from the Feed-in-Tariff, a long-term inflation-linked UK Government price support mechanism which provides a secure income stream. In addition to this, the Company intends to agree power purchase agreements with energy users which will provide additional certainty over exported power income.

Environmental risks

Adverse environmental conditions at the Chelwood solar scheme site may negatively affect the Society’s business and profitability. However, preliminary surveys carried out as part of the planning application process did not reveal any likely adverse environmental risk factors.

The Directors are confident that the likelihood of severe environmental conditions at the Chelwood site is remote. In any event, the Society will be employing proven technologies designed to prevail in adverse environmental conditions and will also hold specialist insurance to mitigate its exposure in the event of loss.

Government policy towards renewable energy may change unfavourably

The Society’s business plan is based on current UK Government and European renewable energy policy. Changes in respect of legislation concerning the FIT in relation to renewable energy projects could have a negative impact on the revenues and profits of the Society.

However, the UK Government has made certain commitments to the FIT which is underpinned by a European Directive to achieve 20% of energy from renewables by 2020. The FIT is subject to regular review though all UK governments have been consistent in avoiding changes which impact projects retrospectively by adopting a grandfathering policy for operational projects. That is, once a project has been accred-ited by Ofgem and is operational, its FIT will remain in place for the full 20 year period.

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Power purchase agreements

There is no guarantee that the Society will secure a satisfactory power purchase agreement. The Directors are continuing to negotiate terms with Smartest Energy to secure the most attractive option for the Society and are confident of securing an agreement on satisfactory terms.

Capital loss

Chelwood Community Energy Limited is a newly formed company. Investing in Chelwood Community Energy Limited shares is not the same as investing money in a bank account as your capital is at risk and you may not get back the full amount you invested. An investment in the shares is not covered by the Financial Services Compensation Scheme. Bank debt repayment takes priority over payments to members.

Failure to secure the full funding requirement

The Society needs to secure £5.85 million to fund the construction of the project, including acquisition and fundraising costs.

The Society has secured a £600,000 share underwriting facility from Resonance Limited which would cover a degree of shortfall in funds raised via the Offer. Failure to raise the Minimum Subscription would mean the project would not go ahead and funds raised through the Offer would be returned to investors without payment of interest.

Triodos Corporate Finance and BWCE have significant experience of successfully raising capital for renewables projects and consider the target achievable.

The successful receipt of a £3.1 million bank loan is a condition of the Offer. Were Triodos Bank to decide not to issue the loan, Ethex would not release the proceeds of the Offer to the Society and, instead, the monies would be returned to investors without payment of interest unless an alternative debt solution on materially similar terms to that offered by Triodos Bank had been identified and concluded.

Failure to pre-accredit the Chelwood solar project by 30 June 2015

If pre-accreditation by Ofgem is delayed beyond 30 June 2015 or if Ofgem decides not to approve the registration of the project, the Society would face a lower FIT than 6.16p/kWh. Mongoose Energy Limited has put in place the necessary means to meet Ofgem requirements, so the estimated FIT is expected to be secured. If the scheme is not pre-accredited in time and therefore has to accept a lower tariff the project is still viable – it would not affect Members’ return but it would reduce contributions to the Chelwood Community Benefit Fund.

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Liquidity

The shares are not readily realisable and it is not intended that any capital will be withdrawable by members for at least three years to ensure compliance with EIS rules. Even then it may be difficult to withdraw shares on demand as this will only be possible once the company is generating sufficient profits and cashflows. Any withdrawal of share capital will be at the discretion of the Board.

Exit routes

The investment should be seen as a long term investment and investors should be prepared to invest their capital for up to 25 years, being the life of the project. The Society may consider refinancing the share capital at an earlier time if it is in the mutual best interests of Members and the Chelwood Community Benefit Fund, however, there are no guarantees as to when this would happen, or if it would happen at all, and there is no prospect of the investment being realised for more than the original amount invested.

Taxation

Information regarding taxation is based upon current UK taxation legislation and HM Revenue & Customs practice. Tax law and practice is subject to change. Any changes in the level and basis of taxation, in tax reliefs or in HM Revenue & Customs practice may affect the value of an investment in the Shares and returns to Members.

Although it is the intention that the Society’s activities should qualify under the EIS (Advance Assurance was given by HMRC in February 2015), there is no guarantee that formal EIS claims will be agreed or that such agreement will not subsequently be withdrawn and in those circumstances subscription monies will not be returned to Investors. Any loss of status of an EIS Qualifying Society, whether through actions taken by the Society or otherwise, may lead to the loss of tax advantages for members. No guarantee can be given that all investments will qualify, or continue to qualify, for Tax Advantages. In this event, any potential returns to Investors would be lower.

Advance Assurance has been given by HMRC for the Withdrawable Shares and for the activity of constructing a 5MW solar array near the village of Chelwood, Bath and North East Somerset.

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Appendix 1: Definitions & terms

Act: The Co-operative and Community Benefit Societies Act 2014

Board of Directors or Board: The Board of Directors of the Society whose names are set out in Section 2 of this document

Capital Gains Deferral: Deferral of CGT (Section 150C and Schedule 5B of the Taxation of Chargeable Gains Act 1992)

Chelwood Solar Limited: Chelwood Solar Limited, a company registered in England and Wales with company number 09198205, which holds the planning permission, site lease, grid connection agreement and other relevant agreements, for the Chelwood solar scheme. Currently owned by Mongoose Energy Limited, ownership of Chelwood Solar Limited will be transferred to Chelwood Community Energy Limited at Financial Close

CGT: Capital Gains Tax

Chelwood Community Energy Limited or Society: Chelwood Community Energy Limited, a community benefit society registered with the FCA with registration number RS007080

Community Benefit Fund: The Chelwood Community Benefit Fund – an independently administered charity which will be established with the objective of funding impactful local infrastructure projects, local wildlife conservation measures and energy efficiency schemes

Conditions to the Offer: The three conditions set out on page 16 which must be satisfied before funds can be released by Ethex to the Society

Development Services Agreement: An agreement between Mongoose Energy Limited and Chelwood Solar Limited under which Mongoose Energy Limited provides development and management services to Chelwood Solar Limited prior to the offer closing

EIS: The Enterprise Investment Scheme as set out in the Income Tax Act 2007

EIS Qualifying Society: A company that meets the EIS requirements regarding EIS Relief and Capital Gains Deferral

EIS Relief: Relief from income tax under EIS

Ethex: Ethex Investment Club Limited, a society registered in England and Wales with company number 7432030

Financial Close: The date on or shortly after which the Conditions of the Offer have been met to the satisfaction of Triodos Corporate Finance

Financial Year-End: 31 December

FIT: Feed-in-Tariff

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FSCS: Financial Services Compensation Scheme

FSMA: Financial Services and Markets Act 2000

HMRC: HM Revenue & Customs

IHT: Inheritance tax

Investors or Members: The persons who subscribe for Ordinary Shares pursuant to the Offer

Launch Date: 12:00 noon on Tuesday 23 June 2015

Management Agreement: An agreement between Mongoose Energy Limited and Chelwood Community Energy Limited under which Mongoose Energy Limited will provide management services to the society prior to the offer closing and then ongoing services once the scheme is operational

Maximum Subscription: The aggregate maximum subscription of £2,750,000 by Members pursuant to the Offer

Members or Investors: The persons who subscribe for Withdrawable Shares pursuant to the Offer

Minimum Subscription: The aggregate minimum subscription of £2,150,000 by Members upon which the Offer is conditional

Mongoose: Mongoose Energy Limited, a company registered in England and Wales with company number 9415125

Offer: The arrangements whereby Investors will subscribe for Withdrawable Shares in the Society, within and subject to the terms set of this document

Offer Document: This document inviting applications to subscribe for Withdrawable Shares

Offer Price: £1 per share

PPA: Power Purchase Agreement

Regulations: The Prospectus Regulations 2005

Society: Chelwood Community Energy Limited, a community benefit society registered with the FCA with registration number RS007080

SPA: Share Purchase Agreement

Tax Advantages: The various tax advantages arising from subscriptions for shares in EIS Qualifying Companies

Triodos: Triodos Bank NV

UK GAAP: UK Generally Accepted Accounting Principles

Withdrawable Shares: Withdrawable shares of £1 in the capital of the Society

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Appendix 2: General information

About the Society (incorporation and activity)

The Society was incorporated in England and Wales on 19 February 2015 under the Co-operative and Community Benefits Society Act 2014 as a Community Benefit Society with the society name Chelwood Community Energy Limited and registered number RS007080. The principal legislation under which the Society operates is the Act. The registered office of the Society is 13 – 14 Orchard Street, Bristol, BS1 5EH.

Group structure

The Society currently does not form part of any group shareholding. The intention, as part of the Offer process, is that the Society will acquire 100% of the share capital of Chelwood Solar Limited (registered number: 9198205), which owns the project development rights, from Mongoose Energy Limited under a formal Share Purchase Agreement (SPA) executed and entered into unconditionally by Financial Close. This is a condition of the Offer as outlined on page 16.

Responsibility statement

The Directors (whose names appear on page 8) and the Society accept responsibility for the information in this document. To the best of the knowledge of the Society and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

Founding members and directors

The current directors are: Jan-Willem Bode, David Bunker, Don Weston and Edward Maxwell. The Directors are not directly remunerated by the Society.

Material contracts

An engagement letter dated 13 May 2015 has been entered into between Chelwood Community Energy Limited and Triodos Bank NV in relation the fundraising. Under this agreement, Triodos has been appointed as agent of the Society to use its

29

reasonable endeavours to procure subscribers for shares under the Offer. The engagement letter provides for the Society to pay Triodos a success fee of £65,000 (plus VAT), contingent upon a successful capital raising.

A Management Agreement will be entered into between Mongoose Energy Limited and Chelwood Community Energy Limited under which Mongoose Energy Limited will provide various pre- and post-Offer services including ongoing performance and financial management services to the Society over the operational project life in return for an annual fee of £30,000. At closing of the Offer Mongoose shall be entitled to a fee of £75,000 plus VAT. This agreement is contingent upon a successful capital raising.

Related party transactions

Chelwood Solar Limited, which is intended to become the wholly owned trading subsidiary of the Society as part of this process, has the following arms length commercial agreements in place:

• A Development Services Agreement with Mongoose under which Mongoose Energy Limited are providing operational and contact negotiation support to Chelwood Solar Limited. This agreement will terminate at Financial Close when the ownership of Chelwood Solar Limited is transferred to Chelwood Community Energy Limited;

• An agreement with Solarcentury dated 2 June 2015 for the design, construction and installation of the Chelwood solar scheme and for ongoing operation and maintenance of the scheme over the operational project life; and

• Provisional heads of terms with Triodos Bank dated 11 June 2015, subject to full technical and commercial due diligence, over the provision of a £3.1 million bank term loan.

Further information

Certain additional project information is available to prospective members from Triodos Corporate Finance on request (subject to confidentiality provisions).

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Appendix 3: Taxation

If you are considering applying for shares, it is important that you understand the taxation consequences of investing in the shares. You should read this section and discuss the taxation consequences with your tax adviser, financial adviser or other professional adviser before deciding whether to invest.

The summary set out below describes certain taxation matters of the United Kingdom based on the Society’s understanding of current law and practice in the United Kingdom as of the date of this Offer Document, both of which are subject to change, possibly with retrospective effect. The summary is intended as a general guide only and is not intended to be, nor should it be construed to be, legal or tax advice.

The summary set out below applies only to persons who are the absolute beneficial owners of shares, who hold their shares as investments and (save where it is explicitly stated otherwise) who are resident and (in the case of individuals) domiciled for tax purposes in the United Kingdom. In particular, members holding their shares via a depository receipt system or clearance service should note that they may not always be the beneficial owners thereof. Some aspects do not apply to certain classes of person (such as dealers, certain professional investors and persons connected with the Society) to whom special rules may apply. The United Kingdom tax treatment of prospective members depends on their individual circumstances and may therefore differ to that set out below or may be subject to change in the future.

If you may be subject to tax in a jurisdiction other than the United Kingdom or are unsure as to your tax position, you should seek your own professional advice. This summary only deals with the matters expressly set out below.

Enterprise Investment Scheme (EIS)

In February 2015, HM Revenue & Customs (HMRC) provided Advance Assurance that the Offer should meet the qualifying conditions of the Enterprise Investment Scheme (EIS). By giving this assurance, HMRC considers that:

• the Society is a qualifying entity which satisfies the rules of the scheme (VCM13000 for EIS);

• the shares to be issued will be eligible shares (VCM12020); and

• the shares will be issued to raise money for a qualifying business activity (VCM12110).

Although this assurance has been given there is no guarantee that either formal approval will be achieved in due course or that approval will not be subsequently withdrawn.

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Advance Assurance has been given by HMRC for the Withdrawable Shares and for the activity of constructing a 5MW solar array near the village of Chelwood, Bath and North East Somerset.

The HMRC assurance does not guarantee the availability of any form of relief under the EIS to any particular subscriber. Investors are advised to take their own taxation advice (any individual considering investing can contact the Small Company Enterprise Centre for advice on whether or not they would be eligible for EIS reliefs on their subscriptions).

Tax Advantages

The Tax Advantages for members making EIS investments in the Society include the following:

EIS Relief on subscriptions

Individuals may make a subscription for Withdrawable Shares in the Society and obtain EIS Relief at 30% of the cost of the shares. Relief can be claimed up to a maximum of £1,000,000 invested in such shares, giving a maximum tax reduction in any one year of £300,000 providing an individual has sufficient income tax liability to cover it. Subject to the rules relating to EIS Relief ‘carry back’ described below, EIS Relief is given in the income tax year in which investment is made.

32

Under the rules introduced in the Finance Act 2009, an individual may utilise the EIS ‘carry back’ facility. This facility allows all or part of the cost of shares acquired in one tax year, to be treated as though those shares had been acquired in the preceding tax year. Relief is then given against the income tax liability of that preceding year rather than against the tax year in which those shares were acquired. This is subject to the overriding limit for relief for each year and subject to the individual having a sufficient income tax liability to utilise the relief.

The certificate stating and confirming the EIS Relief obtainable by an Investor is contained on Form EIS 3 issued by the Society. The Society will apply to HMRC for an EIS 2 certificate to enable it to issue forms EIS 3 to Investors after the Offer has closed and once the Society has commenced trading. An Investor cannot obtain EIS Relief without a Form EIS 3. The latest date on which an Investor can claim EIS Relief is five years after 31 January following the tax year to which the claim relates.

EIS Relief will be withdrawn if an Investor’s shares are not held for three years from the date of investment (or from the date of commencement of the EIS Qualifying Society’s trade if later), or if the Investor is connected with the EIS Qualifying Society in which an Investment is made during the period beginning two years before and ending three years after the date of investment in the EIS Qualifying Society. There are other criteria in which EIS Relief could be withdrawn which have not been detailed here.

Husbands and wives (and civil partners) can each make investments up to £1,000,000 in any income tax year.

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The EIS Relief is currently set at 30% and is given against (but cannot exceed) the individual’s income tax liability for the tax year in which the investment is made (subject to the above carry back provisions).

Example: £

Initial investment 50,000

Less EIS Relief at 30% (15,000)

Net cost of investment 35,000

Capital Gains DeferralIndividuals can defer the CGT due on capital gains arising from the disposal of any kind of asset by electing to reinvest the gain in eligible shares in an EIS Qualifying Society. The investment must be made in the period beginning twelve months before and ending three years after the date of the disposal that gave rise to the capital gains to be deferred. There are no minimum or maximum amounts for deferral.

Investors should note that the Capital Gains Deferral is only a deferral of the original liability to CGT (unless there is a further Capital Gains Deferral). The gain is deferred until there is a chargeable event, such as a disposal of shares. The Society will consult with Investors and will endeavour to structure any exit which could be deemed a disposal in a tax-efficient way, although it is possible that there would be a “clawback” of any deferral relief claimed by an Investor in connection with such shares.

Example: Basic Rate Taxpayer: £


EIS Relief (15,000)

Capital Gains Deferral (at 18%) (9,000)


Example: Higher Rate Taxpayer: £


EIS Relief (15,000)



Loss ReliefAny capital losses realised in respect of an investment in an EIS Qualifying Society (net of EIS Relief attributable to the investment) qualify for loss relief so that the capital loss can be set against capital gains of that tax year or a later tax year or against total income of that tax year or income of the preceding tax year.

34

Inheritance Tax Relief (IHT)The investments made in the Society should in most cases qualify for 100% relief from IHT in the event of the death of an Investor or any other chargeable transfer as long as the investment has been held for two years (from the date of investment, not from the date that the Offer closes).

Example: Basic Rate Taxpayer: £


EIS Relief (15,000)


IHT Relief (at 40%) (20,000)


Example: Higher Rate Taxpayer £


EIS Relief (15,000)


IHT Relief (at 40%) (20,000)


Trustees

Where certain conditions are met and the beneficiaries of a trust are individuals and/or charities, trustees will usually qualify for unlimited Capital Gains Deferral, loss relief (limited to capital gains) and IHT relief. However, neither EIS Relief nor exemption from CGT is available to trustees.

The examples in this section are set out for illustrative purposes only. They are not, and should not be construed as, forecasts and projections of the likely performance of the Society or any investment in it. Please note this is only a condensed summary of the taxation legislation and a potential Investor should obtain his or her own investment or tax advice prior to subscribing for Withdrawable Shares. The value of any tax relief will depend on each individual’s own circumstances and may be subject to change in the future.

Income tax on share interest

Payment of interest on the shares will be made without deduction of, or withholding on account of, United Kingdom income tax.

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