OAP1 Octopus App.1

it is hoped that a larger vehicle will attract increased interest. 
 
To the extent only one or more of the Schemes are completed, the benefits of the 
Enlarged  Company may  not be  fully realised  (in particular,  the annual costs 
savings would be reduced accordingly). 
 
The  aggregate  anticipated  cost  of  undertaking  the  merger is approximately 
 GBP371,600,  including VAT, legal and professional  fees, stamp duty and the costs 
of  winding  up  the  Target  VCTs.  The  costs  of  the  merger  will  be split 
proportionately  between the Companies  by reference to  their respective merger 
net  assets (ignoring merger  costs). Each of  the Companies will be responsible 
for  its allocation of  the estimated merger  costs whether or  not a particular 
Scheme  is approved and  becomes effective. The  Boards believe that the Schemes 
provide  an efficient way of  merging the Companies with  a lower level of costs 
compared  with other merger routes. Apollo  3 was selected as the acquirer being 
the  largest of the  Companies (and hence  resulting in a  lower amount of stamp 
duty being payable) and the most mature. 
 
On  the assumption that the  net assets of the  Enlarged Company will remain the 
same  immediately after  the merger,  the reduction  in the annual running costs 
(ignoring  annual management  fees, performance  incentive fees  and exceptional 
items)  for the Enlarged Company is estimated to be at least  GBP288,900 per annum, 
in  particular, through  the reduction  in directors'  and advisers' fees, audit 
fees,  secretarial fees, printing costs and listing fees, as well as other fixed 
costs.  This  reduction  would  represent  approximately  0.6% per  annum of the 
expected net assets of the Enlarged Company. On this basis, and assuming that no 
new  funds were to be  raised or investments realised  to meet annual costs, the 
Board  and the Target VCTs' Boards believe that the costs of the merger would be 
recovered within 16 months. 
 
As  an illustration, had the merger  been completed on 30 April 2012, the number 
of New Apollo 3 Shares that would have been issued  for each existing Target VCT 
share held are as follows: 
 
  * Apollo 1: 1.037649 New Apollo 3 Shares for every share held in Apollo 1 
 
  * Apollo 2: 1.037459 New Apollo 3 Shares for every share held in Apollo 2 
 
  * Apollo 4: 1.068556 New Apollo 3 Shares for every share held in Apollo 4 
 
The  illustrations have not been adjusted for the payment of dividends or shares 
bought back by the Companies after 30 April 2012. 
 
ENHANCED BUYBACK FACILITY 
 
The  board  of  Apollo  3 has  agreed  to  offer  to its shareholders (including 
shareholders who will roll across to Apollo 3 as part of the merger process) the 
opportunity  to participate in  the Enhanced Buyback  Facility. The terms of the 
Enhanced  Buyback Facility are set out in the Apollo 3 prospectus ("Prospectus") 
which  accompanies  the  circulars  being  sent  out  to the shareholders of the 
Companies today. 
 
 ·             Apollo 3 shall offer (pursuant to a tender offer) to all UK Apollo 
3 shareholders (including shareholders following the merger) on the register on 
1 October 2012 to purchase up to 50% of the issued Apollo 3 share capital as at 
that date. 
 
 ·             Shareholders eligible to participate may tender some or all of 
their existing holding of Apollo 3 shares, such Apollo 3 shareholders: 
 
o             being entitled to sell up to a basic entitlement (this being up to 
50% of their holding on the register on 1 October 2012, rounded down to the 
nearest whole Apollo 3 share); and 
 
o              being able to tender additional Apollo 3 shares that may be sold 
to the extent that other Apollo 3 shareholders do not participate up to the 
maximum amount available (any such excess to be allocated pro rata to the amount 
number of Apollo 3 shares tendered, subject to the discretion of the Apollo 3 
board). 
 
 ·             The purchase will be subject to the participating Apollo 3 
shareholder agreeing to reinvest all of the proceeds of sale in the purchase of 
New Apollo 3 Shares. 
 
 ·             The purchase will be completed at a price equal to the most 
recently published net asset value per Apollo 3 share at the time of purchase. 
 
 ·             The reinvestment will be completed at a price equal to the most 
recently published net asset value per Apollo 3 share at the time of allotment, 
divided by 0.95 (representing the costs of providing the facility, referred to 
below). 
 
 ·             Allocations of New Apollo 3 Shares under the reinvestment will be 
rounded down and fractions will not be allotted. 
 
 ·              Financial intermediaries will receive a commission of an amount 
equal to 2.5% of their client's reinvestment (which may be waived and reinvested 
for additional New Apollo 3 Shares purchased on behalf of their client as part 
of the Enhanced Buyback Facility) and annual trail commission. 
 
Octopus  will be paid an  administration fee of 5% of  the gross proceeds raised 
through  the issue of New Apollo  3 Shares (ignoring reinvested commission) from 
which  all  costs  and  expenses  will  be  paid (including initial intermediary 
commission  but  excluding  annual  trail  commission).  Any  costs  above this, 
excluding annual trail commission, will be met by Octopus. 
 
The  net  effect  for  participating  Apollo  3 shareholders  is  that they will 
'substitute'  1,000 existing Apollo 3 shares with  950 New Apollo 3 Shares (plus 
any  New Apollo  3 Shares issued  pursuant to  reinvested commission), the small 
reduction  in  the  value  of  the  investment holding representing the costs of 
implementing the Enhanced Buyback Facility, with the reinvestment qualifying for 
upfront income tax relief of up to 30%. 
 
The  Enhanced Buyback Facility is conditional  on the approval of resolutions by 
Apollo  3 shareholders and the extent to which it will be implemented is further 
conditional  on Apollo  3 having sufficient  reserves to  effect the purchase of 
shares pursuant to the Enhanced Buyback Facility. 
 
The  Enhanced Buyback Facility  will open on  1 October 2012 (with, as mentioned 
above,  an Enhanced Buyback Facility record  date for participation of 1 October 
2012, i.e.  after the Schemes are expected to become effective and New Apollo 3 
Shares  have  been  issued  to  Target  VCT  shareholders) and will close on 30 
November  2012. The board of Apollo 3 may  amend or extend (as applicable) these 
dates at their discretion. 
 
THE OFFER 
 
The  board of Apollo  3 has decided to  take the opportunity  to raise up to  GBP20 
million  through  the  Offer.  The  board  of  Apollo  3 may,  in their absolute 
discretion, decide to increase the Offer to raise up to a further  GBP10 million if 
there  proves to be  excess demand from  investors, subject to  a maximum of 35 
million  New  Apollo  3 Shares  being  offered  pursuant to the Offer. This will 
provide  Apollo 3 shareholders and new investors  with the opportunity to invest 
in  Apollo 3 and benefit from the  tax reliefs available to qualifying investors 
in VCTs. The terms of the Offer are set out in the Apollo 3 Prospectus. 
 
New  Apollo 3 Shares issued under  the Offer will be  at an offer price equal to 
the  most recently published NAV  of an Apollo 3 share,  divided by 0.95 to take 
into account Offer costs of 5% and rounded up to the nearest 0.1p per share. 
 
Octopus  will act as promoter to the Offer and be paid a commission of 5% of the 
gross  proceeds  raised  through  the  issue  of  New  Apollo 3 Shares (ignoring 
reinvested commission) from which all costs and expenses will be paid (including 
initial  intermediary  commission  but  excluding  any  permissible annual trail 
commission).  Any  costs  above  this,  excluding  any  permissible annual trail 
commission, will be met by Octopus. 
 
The   Offer  is  conditional  on  the  approval  of  resolutions  by  Apollo  3 
Shareholders. The Offer will open on 1 October 2012. 
 
INVESTMENT MANAGEMENT AND ADMINISTRATION ARRANGEMENTS 
 
Octopus  is the  investment manager  of all  of the  Companies and also provides 
administration and secretarial services to all of the Companies. 
 
In  respect of Apollo 3, Octopus receives an annual investment management fee of 
an  amount equal to 2% of the net assets of Apollo 3 at the end of the preceding 
accounting  period  (plus  any  applicable  VAT),  an  annual administration and 
accounting  fee equal to  0.3% of the net  assets of Apollo  3 at the end of the 
preceding  accounting  period  (plus  applicable  VAT)  and  an  annual  company 
secretarial  fee of  GBP5,000  (plus VAT). These  fee arrangements will continue to 
apply  to the Enlarged Company  but will be across  the enlarged net assets. The 
existing  annual expense cap on normal running costs of an amount equal to 3.3% 
of the net assets will also continue in respect of the Enlarged Company. 
 
The  board  of  Apollo  3 and  Octopus  have  agreed, subject to approval of the 
shareholders  of Apollo 3, to replace the existing performance related incentive 
fee  arrangements  for  Apollo  3 with  revised  arrangements. Under the revised 
arrangements,  Octopus  will  be  entitled  to  an  annual  performance  related 
incentive fee in each accounting period commencing on or after 1 February 2012, 
subject  to the Total Return  being 100p at the end  of the relevant period. The 
amount  of the fee will be equal to 20% by  which the Total Return as at the end 
of the relevant period exceeds the Overall Hurdle Return (and payable in respect 
of each share in issue at the end of the relevant period). 
 
For  these purposes,  Total Return  means NAV  per Apollo 3 share plus dividends 
paid  per Apollo 3 share  since launch and  the Overall Hurdle  Return means the 
greater of the: 
 
  * Base  Rate Hurdle  Return -  which means  the Total  Return as at 31 January 
    2012 increased  by the  cumulative annual  weighted average  of the  Bank of 

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