Placing andAdmission
to AIM

Nominated Adviser and Broker:

The location solutions company

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of thisdocument, or the action you should take, you are recommended to seek immediately your own personal financial advice from your stockbroker,
bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000.
This document, which comprises an AIM admission document drawn up in accordance with the AIM Rules for Companies, has been issued in connection
with the application for admission to trading on AIM of the entire issued and to be issued ordinary share capital of the Company. This document does
not constitute an offer or constitute any part of an offer to the public within the meaning of sections 85 and 102B of FSMA, the Act or otherwise.
Accordingly, this document does not comprise a prospectus within the meaning of section 85 of FSMA and has not been drawn up in accordance with
the Prospectus Rules or approved by or filed with the Financial Services Authority or any other competent authority.
Application will be made for the New Placing Shares, the Additional Shares and the Existing Ordinary Shares to be admitted to trading on AIM,a market operated by the London Stock Exchange. AIM is a market designed primarily for emerging or smaller companies to which a higher
investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official List of theUnited Kingdom Listing Authority. A prospective investor should be aware of the risks of investing in such companies and should make thedecision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. Each AIM company isrequired pursuant to the AIM Rules for Companies to have a nominated adviser. The nominated adviser is required to make a declaration to the
London Stock Exchange on Admission in the form set out in Schedule Two to the AIM Rules for Nominated Advisers. The London Stock Exchange
has not itself examined or approved the contents of this document.
The Directors, whose names appear on page 5 of this document, and the Company accept responsibility for the information contained in this document.
To the best of the knowledge and belief of the Directors and the Company (who have taken all reasonable care to ensure that such is the case), theinformation contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. All the
Directors accept individual and collective responsibility for compliance with the AIM Rules for Companies.
The whole of this document should be read. An investment in the Company is speculative. The attention of prospective investors is drawn inparticular to Part 2 of this document which sets out certain risk factors relating to any investment in Ordinary Shares. All statements regarding
the Group’s business, financial position and prospects should be viewed in light of these risk factors.

AR Anx1 –1.1
AR Anx 3 –1.1
AR Anx 1 –1.2
AR Anx 3 –1.2
AR Anx 1 –1.1

UBISENSE GROUP PLC(incorporated and registered in England and Wales with registered number 05589712)

PLACING OF UP TO 4,817,867 ORDINARY SHARES AT 180 PENCE PER ORDINARY SHAREANDADMISSION TO TRADING ON AIM
NOMINATED ADVISER AND BROKER:CANACCORD GENUITY LIMITEDSHARE CAPITAL(immediately following Admission)
Issued and fully paid ordinary shares of 2 pence each
Number

£21,421,758£428,435.16

The Placing Shares will rank pari passu in all respects with the Existing Ordinary Shares and will rank in full for all dividends or other
distributions declared, made or paid on the Ordinary Shares after Admission. It is expected that Admission will take place and that trading in
the Ordinary Shares will commence on 22 June 2011. The Ordinary Shares are not traded on any recognised investment exchange and no otherapplications have been made.
This document does not constitute an offer to sell or issue, or the solicitation of an offer to subscribe for or buy, Ordinary Shares to any person
in any jurisdiction to whom it is unlawful to make such offer or solicitation. In particular, this document is not for distribution in or into the UnitedStates of America, Canada, Japan, the Republic of Ireland, the Republic of South Africa, Australia or New Zealand. The issue of the Ordinary Shares has
not been, and will not be, registered under the applicable securities laws of the United States of America, Canada, Japan, the Republic of Ireland, theRepublic of South Africa, Australia or New Zealand and the Ordinary Shares may not be offered or sold directly or indirectly within the United States ofAmerica, Canada, Japan, the Republic of Ireland, the Republic of South Africa, Australia or New Zealand or to, or for the account or benefit of, any
persons within the United States of America, Canada, Japan, the Republic of Ireland, the Republic of South Africa, Australia or New Zealand.
The distribution of this document in certain jurisdictions may be restricted by law and therefore persons into whose possession this document comesshould inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities
laws of any such jurisdiction.
The Ordinary Shares have not and will not be registered under the Securities Act and may not be offered or sold within the United States. The Ordinary
Shares are being offered and sold outside the United States in reliance on Regulation S.

AR Anx 3 –4.7

Canaccord Genuity which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser and broker
to the Company in connection with the proposed Placing and Admission and will not be acting for any other person or otherwise be responsible to any personfor providing the protections afforded to customers of Canaccord Genuity or for advising any other person in respect of the proposed Placing and Admission.
Canaccord Genuity’s responsibilities as the Company’s nominated adviser and broker under the AIM Rules for Companies and the AIM Rules for NominatedAdvisers are owed solely to the London Stock Exchange and are not owed to the Company or to any Director or to any other person in respect of such person’s
decision to acquire shares in the Company in reliance on any part of this document. No representation or warranty, express or implied, is made by Canaccord
Genuity as to any of the contents of this document (without limiting the statutory rights of any person to whom this document is issued) and Canaccord
Genuity has not authorised the contents of any part of this document and accepts no liability whatsoever for the accuracy of any information or opinions
contained in this document or for the omission of any material information from this document for which the Company and the Directors are solely responsible.
The information contained in this document has been prepared solely for the purposes of the Placing and Admission and is not intended to inform or be
relied upon by any subsequent purchasers of Ordinary Shares (whether on or off market) and accordingly no duty of care is accepted in relation to them.
Canaccord Geunity has not authorised the contents of any part of this document. No liability whatsoever is accepted by Canaccord Genuity for the accuracyof any information or opinions contained in this document, for which the Directors are solely responsible, or for the omission of any information from thisdocument for which it is not responsible.
Copies of this document will be available free of charge during normal business hours on any day (except Saturdays, Sundays and public holidays) fromthe Company at its registered office and at the offices of Mills & Reeve LLP, 130 Fenchurch Street, London, EC3M 5DJ from the date of this document
until the date which is one month from the date of Admission. A copy of this document will also be available from the Company’s website –www.ubisense.net

AR Anx 3 –10.1
AR Anx 1 –1.1
AR Anx 3 –1.1

FORWARD LOOKING STATEMENTS
This document includes statements that are, or may be deemed to be, “forward-looking statements”.
These statements relate to, among other things, analyses and other information that are based on forecastsof future results and estimates of amounts not yet determinable. These statements also relate to the Group’s
future prospects, developments and business strategies.
These forward-looking statements can be identified by their use of terms and phrases such as “anticipate”,“believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will” or thenegative of those variations, or comparable expressions, including references to assumptions. Thesestatements are primarily contained in Part 1 of this document.
The forward-looking statements in this document, including statements concerning projections of theGroup’s future results, operations, profits and earnings, are based on current expectations and are subject
to risks and uncertainties that could cause actual results to differ materially from those expressed or
implied by those statements.
Certain risks to and uncertainties for the Group are specifically described in Part 2 of this document
headed “Risk Factors”. If one or more of these risks or uncertainties materialises, or if underlying
assumptions prove incorrect, the Group’s actual results may vary materially from those expected,
estimated or projected. Given these risks and uncertainties, potential investors should not place any
reliance on forward-looking statements.
Forward-looking statements may and often do differ materially from actual results. Any forward-looking
statements in this document are based on certain factors and assumptions, including the Directors’ current
view with respect to future events and are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group’s operations, results of operations, growth strategy
and liquidity. Whilst the Directors consider these assumptions to be reasonable based upon information
currently available, they may prove to be incorrect. Prospective investors should therefore specificallyconsider the risk factors contained in Part 2 of this document that could cause actual results to differ
before making an investment decision. Save as required by law or by the AIM Rules for Companies, theCompany undertakes no obligation to publicly release the results of any revisions to any forward-looking
statements in this document that may occur due to any change in the Directors’ expectations or to reflect
events or circumstances after the date of this document.

MARKET AND FINANCIAL INFORMATION
The data, statistics and information and other statements in this document regarding the markets in which
the Group operates, or the Group’s position therein, are based on the Group’s records or are taken orderived from statistical data and information derived from the sources described in this document.
In relation to these sources, such information has been accurately reproduced from the publishedinformation and, so far as the Directors are aware and are able to ascertain from the information provided
by the suppliers of these sources, no facts have been omitted which would render such information
inaccurate or misleading.
Various figures and percentages in tables in this document have been rounded and accordingly may not
total. Certain financial data has also been rounded. As a result of this rounding, the totals of data presented
in this document may vary slightly from the actual arithmetical totals of such data.
All times referred to in this document are, unless otherwise stated, references to London time.

CURRENCIES
Unless otherwise indicated, all references in this document to “EUR”, “€” or “Euro” are to the lawful
currency of the European Economic and Monetary Union.
Unless otherwise indicated, all references in this document to “GBP”, “£”, “pounds sterling”, “pounds”,“sterling”, “pence” or “p” are to the lawful currency of the United Kingdom.
Unless otherwise indicated, all references in the document to “USD” or “$” or “Dollar” are to the lawful
currency of the United States of America.
2

CONTENTS
Table of Contents

3

Placing Statistics and Expected Timetable of Principal Events

4

Directors, Secretary and Advisers

5

Definitions

6

Key Information

9

Part 1 Information on the Group

10Part 2 Risk Factors

27Part 3 Financial Information

34

Part A – Accountant’s Report on the Historical Financial Information of the Group

34

Part B – Historical Financial Information of the Group36
69

Part 4 Additional Information

3

PLACING STATISTICS AND EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Placing Statistics
Placing Price

180 pence

Number of Existing Ordinary Shares

17,565,310

Number of Additional Shares

1,078,670

Number of New Placing Shares

2,777,778

Number of Selling Shareholder Shares

2,040,089

Number of Ordinary Shares in issue following the Placing and Admission

21,421,758

Proportion of Enlarged Share Capital represented by New Placing Shares

13.0 per cent.

Market capitalisation at the Placing Price£38.6 million

Gross proceeds of the Placing£8.7 million

Gross proceeds of the Placing attributable to the New Placing Shares£5.0 million

Net proceeds of the Placing attributable to the New Placing Shares£4.2 million

TickerUBI

ISIN

GB00B3NCXX73SEDOLB3NCXX7

Expected Timetable of Principal Events
Event

Time and Date

Publication of this document

17 June 2011

Admission effective and dealings commence on AIM

8.00 a.m. on 22 June 2011

CREST accounts to be credited in respect of Ordinary Shares

8.00 a.m. on 22 June 2011

Despatch of definitive share certificates for Placing Shares (where applicable) by

6 July 2011

Each of the times and dates set out above and mentioned elsewhere in this document may be subject
to change at the absolute discretion of the Company and Canaccord Genuity without further notice.

4

DIRECTORS, SECRETARY AND ADVISERS
Directors

Professor Andrew Hopper CBE (Non-Executive Chairman)
Richard Terence Green (Chief Executive Officer)
Gordon Michael Campbell (Chief Financial Officer)
Peter George Harverson (Non-Executive Director)
Jonathan Keith Lomas (Non-Executive Director)
Dr. Richard Gordon Newell (Non-Executive Director)
Dr. Robert Daniell Sansom (Non-Executive Director)
Paul Ronald Taylor (Non-Executive Director)

Company Secretary

Gordon Michael Campbell

Registered Office, Principal Place ofBusiness and Business Address ofeach of the Directors

St. Andrew’s House
90 St. Andrew’s Road
Chesterton
Cambridge CB4 1DL

Websitewww.ubisense.net

Nominated Adviser and Broker

Canaccord Genuity Limited
Cardinal Place
80 Victoria Street
London SW1E 5JL

Legal advisers to the Company

Mills & Reeve LLPFrancis House
112 Hills Road
Cambridge CB2 1PH

Legal advisers to the Company
as to US law

Ireland Stapleton Pryor & Pascoe, PC
1675 Broadway, Suite 2600
Denver, CO 80202
US

Legal advisers to the Company
as to German law

Graf Von Westphalen
Große Bleichen 21
D-20354 Hamburg
Germany

Legal advisers to the NominatedAdviser and Broker

Dorsey & Whitney (Europe) LLP
21 Wilson Street
London EC2M 2TD

Auditors to the Company
and Reporting Accountant

Grant Thornton UK LLP
Byron House
2 Cambridge Business Park
Cambridge CB4 0WZ

Registrar

Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE

Public Relations adviser to theCompany

College Hill
78 Cannon Street
London EC4N 6HH

5AR Anx 1 –2.1

DEFINITIONS
The following definitions apply throughout this document, unless the context otherwise requires:Act

the Companies Act 2006 (as amended)

Additional Sharesan aggregate of 1,078,670 Ordinary Shares, comprising the963,320 Ordinary Shares to be issued on Admission onconversion of the Convertible Loan and the 115,350
Ordinary Shares to be issued on Admission pursuant to theexercise of the HSBC Warrants

Admission

the admission of the Existing Ordinary Shares, theAdditional Shares and the New Placing Shares to trading
on AIM becoming effective in accordance with Rule 6 of
the AIM Rules for Companies

Admission Datethe date of Admission being 22 June 2011

AIM

AIM, a market operated by the London Stock Exchange

AIM Rules for Companies

the AIM Rules for Companies published by the London
Stock Exchange from time to time

AIM Rules for Nominated Advisers

the AIM Rules for Nominated Advisers published by the
London Stock Exchange from time to time

Articlesthe articles of association of the Company as amended fromtime to time

BMW Group

Bayerische Motoren Werke AG and its group of companies

Board or Directors

the board of directors of the Company, whose names are
set out on page 5 of this document

Canaccord Genuity

Canaccord Genuity Limited of Cardinal Place, 80 Victoria
Street, London SW1E 5JL

certificated or in certificated form

not in uncertificated form (that is, not in CREST)

the Company or Ubisense

Ubisense Group plc, a company incorporated under thelaws of England & Wales with registered number 05589712
whose registered office is at St. Andrew’s House,
90 St. Andrew’s Road, Chesterton, Cambridge CB4 1DL

Convertible Loanthe convertible loans held by certain investors and enteredinto by the Company on 31 December 2008

CREST

the computerised settlement system operated by Euroclear
and which facilitates the electronic transfer of shares

Disclosure and Transparency Rules

the Disclosure and Transparency Rules made by the Financial
Services Authority pursuant to section 73A of the FSMAEADS Group

European Aeronautic Defence and Space Company EADS
N.V. and its group of companies

Equity Incentive Planthe Ubisense Trading Limited 2006 Equity Incentive Plan

Euroclear

Euroclear UK & Ireland Limited, a company incorporated
in England and Wales

Enlarged Share Capital

together, the Existing Ordinary Shares, the New Placing
Shares and the Additional Shares

Existing Ordinary Sharesthe 17,565,310 existing Ordinary Shares in issue as at thedate of this document
6

FSA or Financial Services Authority

the Financial Services Authority of the United Kingdom

FSMA

the Financial Services and Markets Act 2000 (as amended)

GE Smallworld

a division of GE Energy which is part of the General ElectricCompany and a reference to “Smallworld” is a reference to
Smallworldwide plc prior to its acquisition by GE Energy

Group

the Company and its subsidiaries and “Group Company”
should be interpreted accordingly

HSBC Warrants

the warrants held by HSBC Bank plc pursuant to which
HSBC Bank plc is entitled to subscribe for Ordinary
Shares, further details of which are set out in paragraph 10
of Part 4 of this document

London Stock Exchange

London Stock Exchange plc

New Articles

the articles of association of the Company that are to takeeffect on Admission

New Placing Sharesthe 2,777,778 new Ordinary Shares which are to be placed
by Canaccord Genuity pursuant to the Placing Agreement

Nominated Adviser and Broker Agreement the agreement entered into on 16 June 2011 between the
Company, the Directors and Canaccord Genuity details of
which are set out in paragraph 10 of Part 4 of this document
Ordinary Sharesordinary shares of £0.02 each in the capital of the Company

Placeesthe subscribers for Placing Shares pursuant to the Placing

Placing

the conditional placing of the New Placing Shares pursuant
to the Placing Agreement and of the Selling Shareholder
Shares pursuant to the Selling Shareholder Agreements, ineach case, by Canaccord Genuity at the Placing Price

Placing Agreement

the conditional agreement dated 16 June 2011 between the
Company, Canaccord Genuity and the Directors relating
to the Placing, further details of which are set out inparagraph 10 of Part 4 of this document

Placing Price

180 pence per Placing Share

Placing Shares

the New Placing Shares and the Selling Shareholder
Shares which are the subject of the Placing

Prospectus Rules

the prospectus rules made by the Financial Services
Authority pursuant to section 73A of the FSMA

Regulation S

Regulation S under the Securities Act

Regulations

the Uncertificated Securities(SI2001/3755) (as amended)

Regulatory Information Servicea regulatory information service that is approved by the
Financial Services Authority and that is on the list of
regulatory information service providers maintained by the
Financial Services Authority

RTLS

real time location system

Securities Act

the US Securities Act of 1933 (as amended)

Selling Shareholder Agreements

the conditional agreements between each Selling
Shareholder and Canaccord Genuity pursuant to which
Canaccord Genuity has agreed to use reasonable endeavours
to procure placees for the Selling Shareholder Shares
7

Regulations

2001

Selling Shareholders

certain existing shareholders of the Company who will beselling Ordinary Shares on Admission and whose names
are found in paragraph 11 of Part 4 of this document

Selling Shareholder Sharesthe 2,040,089 Ordinary Shares being sold on Admission
by the Selling Shareholders and which are to be placed on
their behalf by Canaccord Genuity, in each case inaccordance with such Selling Shareholder’s Selling
Shareholder Agreement

Shareholder

a holder of Ordinary Shares from time to time and references
to “Shareholders” shall be construed accordingly

Share Options

options granted under either the Share Option Scheme, or
the Equity Incentive Plan or pursuant to an Unapproved
Option Agreement

Share Option Scheme

the Ubisense Trading Limited 2006 Employees’ Share
Option Scheme

subsidiarya subsidiary, as that term is defined in section 1162 of the Act

subsidiary undertaking

a subsidiary undertaking, as that term is defined in
section 1159 of the Act

Ten Sails

Ten Sails LLP, a limited liability partnership incorporated
under the laws of England & Wales with registered number
OC304383 which was dissolved on 14 August 2007

Ubisense SAS

Ubisense SAS a company incorporated under the laws ofFrance on 11 March 2011 with registered number
530 944 966

Ubisense AG

Ubisense AG a company registered with number HRB 19370
at the local court of Dortmund and incorporated under thelaws of Germany on 30 June 2004

Ubisense Inc

Ubisense, Inc. a company incorporated as a Delaware
corporation in the US on 1 October 2003

Ubisense Limited

Ubisense Limited a company incorporated under the lawsof England & Wales with registered number 04489603
whose registered office is at St. Andrew’s House,
90 St. Andrew’s Road, Chesterton, Cambridge CB4 1DL

Ubisense Solutions Inc

Ubisense Solutions, Inc. a company incorporated under thelaws of Canada on 26 August 2009

UKLA or UK Listing Authority

the Financial Services Authority acting in its capacity as thecompetent authority for the purposes of Part VI of FSMA

Unapproved Option Agreements

the standalone option agreements entered into with
employees resident in either the UK, Canada or Germany

uncertificated or in uncertificated form

recorded on the register of Ordinary Shares as being held in
uncertificated form in CREST, entitlement to which, by virtueof the Regulations, may be transferred by means of CREST

US or United States

the United States of America, its territories and possessions,
any state of the United States and the District of Columbia

VAT

value added tax

VCT

a company which is, or which is seeking to become,approved as a venture capital trust under section 842AA of
the Income and Corporation Taxes Act 1988
8

KEY INFORMATION
The following summary information should be read as an introduction to the more detailed
information appearing elsewhere in this document. Any investment decision relating to thePlacing should be based on a consideration of this document as a whole and not solely on thissummarised information.
The Business•
Ubisense is a world leader in providing end to end (hardware, software and services) real-time location
solutions to companies allowing them to track people and assets with a high degree of accuracy.
•

The Group operates in two divisions: Real-Time Location Systems (“RTLS”) and Geospatial.

•

The RTLS division uses Ubisense’s proprietary technology to target high value manufacturingbusinesses which are used to track assets, such as tools, people and vehicles, in factories and otherindoor environments with an accuracy that satellite based systems cannot currently achieve.

•

Ubisense’s ultra-wideband (“UWB”) based RTLS is currently one of the few systems that delivers
both reliable accuracy and the ability to track resources in three dimensions in real-time.

•

The Geospatial division uses Ubisense’s expertise in location solutions to deliver applications,software and other solutions primarily in the utilities and telecom sectors.

•

The Geospatial division focuses on the detailed mapping of network assets and provides, on behalf of
its customers, network management planning and design, and has particular expertise in GE Smallworld
software and solutions.

Key Strengths•
The Group has a secure platform on which to develop its business and has progressed to date byleveraging the profitable, cash generative Geospatial business whilst developing its RTLS technologies.
•

Ubisense has large manufacturing and industrial companies in its existing customer base. The
Directors believe considerable opportunities exist for further revenue generation within its current
customer base.

•Ubisense’s RTLS product is proven in industrial environments and Ubisense currently has numerous
blue chip customers. Ubisense has received a number of awards in recent times.

•

The Board has experience in growing early stage technology businesses into successful andprofitable companies. Several members of the Board have previously founded, grown and thensubsequently sold technology businesses.

•

The Directors believe the Group’s RTLS product is currently the most accurate and reliable solution
available to support high value manufacturing and industrial processes indoors.

•

Ubisense has assembled a considerable set of proprietary intellectual property relating to its
RTLS product.

Strategy
Ubisense’s business strategy is to build upon its existing customer relationships and secure new customer
relationships whilst expanding and diversifying its RTLS and Geospatial offerings.
Reasons for the Placing and Admission
The net proceeds of the Placing receivable by Ubisense are expected to be approximately £4.2 million
and are intended to be used to repay the Company’s outstanding debt facility, to market and develop new
relationships, to allow the development of additional intellectual property in the Group and to allow theGroup to develop, if relevant opportunities arise, through selective acquisition opportunities.

9PART 1INFORMATION RELATING TO THE GROUP

1.
Introduction
Ubisense is a world leader in providing end to end (hardware, software and services) real-time location
solutions to companies allowing them to track people and assets with a high degree of accuracy. In addition,
Ubisense’s solutions give enterprises the ability to bring visibility and control to business processes byusing the data generated from the tracking of such assets to lower costs and drive logistical efficiencies.

Anx 1 –
6.1.1

The Group operates in two divisions; Real-Time Location Systems (“RTLS”) and Geospatial.
The RTLS division uses Ubisense’s proprietary technology to target high value manufacturing businesses.
Ubisense’s RTLS products are used to track assets, such as tools, people and vehicles, in factories andother indoor environments with an accuracy that satellite based systems cannot currently achieve.
Ubisense’s ultra-wideband (“UWB”) based RTLS is currently one of the few systems that delivers bothreliable accuracy and the ability to track resources in three dimensions in real-time.
The Geospatial division uses Ubisense’s expertise in location solutions to deliver applications, softwareand other solutions primarily in the utilities and telecom sectors. The Geospatial division focuses on thedetailed mapping of network assets and provides, on behalf of its customers, network management
planning and design and has particular expertise in GE Smallworld software and solutions.
Demand for RTLS technologies is increasing due to industrial manufacturers and others recognising thebenefits of real-time asset tracking. The market for RTLS is estimated to be worth over $2.7 billion by 2018
and the Directors believe that the Group is very well positioned to be a significant supplier to this market.

AR Anx 1 –12.1

Notable customers of the Group include Atlas Copco, BMW, Aston Martin and Airbus in the RTLS
division and Deutsche Telekom, Duke Energy, Swisscom and ExxonMobil in the Geospatial division.
The Company is proposing to raise approximately £4.2 million (net of expenses) by issuing 2,777,778
New Placing Shares at the Placing Price. The New Placing Shares represent approximately 13.0 per cent.
of the Enlarged Issued Share Capital. In addition, Canaccord Genuity has agreed, as agent for the Selling
Shareholders, to use reasonable endeavour to procure placees for the Selling Shareholder Shares at the
Placing Price. The proceeds of the Placing receivable by the Company will principally be used to provide
working capital so that the Group can expand its RTLS offering to new customers and enter new markets
whilst continuing to grow steadily its Geospatial division both organically and potentially throughacquisition, and further details of which are set out in paragraph 9 of this Part 1.
2.
Background and funding history
The entity that is now a wholly owned subsidiary of the Company, Ubisense Limited, was founded in
2002 by Andrew Ward, Paul Webster, Rupert Curwen and Peter Steggles who remain employees of theGroup. The four founders were joined shortly thereafter by Professor Andrew Hopper CBE, who iscurrently the Chairman of the Company. Following a merger with Ten Sails LLP, the Group expandedout of pure technology and became an end to end location solutions provider. Ten Sails itself was set up
by four former Smallworld employees, including Richard Green, Ubisense’s current Chief Executive
Officer, following the acquisition of Smallworld by GE in 2000.
The business of Ten Sails that merged into Ubisense became Ubisense’s Geospatial division and is theorigin of the Group’s particular expertise in GE Smallworld software and solutions. Through theacquisition, Ubisense gained an established team with extensive experience of building and selling
software systems globally in the location technology sector, and the Geospatial division’s staff provided
the beginnings of its customer relations network and the consulting expertise needed to deliver an
integrated suite of solutions.

10

AR Anx 1 –5.1.5; 7.1

Over recent years, the profitability of the Geospatial division has done much to help fund thedevelopment of the RTLS division and existing Geospatial consulting work has helped fund thedevelopment of the Group’s RTLS technology. This, in conjunction with external funding has been used
to support the Group’s growth.
Since November 2006, the Company has raised a total of approximately £7.9 million from a number ofinvestors including founders, employees of the Group and institutional investors. Approximately £2.9 million
was raised in three tranches of convertible loan that were issued between November 2006 and December 2008.
Two of these tranches have been fully repaid or converted into Ordinary Shares and the third tranche, theConvertible Loan, will automatically convert into 963,320 Ordinary Shares on Admission.
In November 2010, the Company raised gross proceeds of £5.0 million by way of a pre-Admission equity
fundraising. The fundraising was led by Canaccord Genuity who arranged for a number of new institutional
investors to participate in the fundraising alongside existing shareholders of the Company. The additional
funding enabled Ubisense to further capitalise on a growing and significant list of opportunities in specificmarkets and to enable the Company to address the growing demand for its RTLS technologies.
Part of the additional funding raised in November 2010 was used specifically to enhance the Company’s
growing relationship with the leading industrial tool company, Atlas Copco, and since the funding, theCompany, working in conjunction with Atlas Copco, has initiated pilot schemes with some of Atlas
Copco’s global automotive customers, including GM, Hyundai and Audi.
Ubisense Limited entered into a facility agreement with HSBC Bank Plc on 22 February 2008 pursuant
to which HSBC Bank plc, as lender, made available to the Group a facility of up to £2,000,000. As at
31 December 2010, £894,643 was drawn down and as at 16 June 2011 (being the latest practicable date
before the date of this document) £728,968 was outstanding pursuant to this facility. No further drawdown
is permitted under this facility and any amounts, once repaid, are not available for further drawing.
3.
Business overview
The Group legally consists of 6 companies headed by Ubisense Group plc (UK). The subsidiaries are all
100 per cent. owned by Ubisense Group plc and are: Ubisense Limited (UK); Ubisense AG (Germany);
Ubisense, Inc. (US); Ubisense Solutions, Inc. (Canada); and Ubisense SAS (France).

Anx 1 –
6.1.1; 6.1.2;
7.1; 7.2

Ubisense Group plc(UK)

Ubisense Limited(UK)

Ubisense AG(Germany)

Ubisense Inc.
(US)

Ubisense Solutions Inc.
(Canada)Ubisense SAS(France)

As at the date of this document, the Company employs 125 staff based in the UK, Germany, US, France
and Canada and is, in addition, using approximately 50 contractors.
The RTLS division
Product
The Group’s RTLS division primarily serves the automotive, aerospace and transport industries providing
complete end to end location solutions comprising hardware products to enable real-time location ofpeople and assets, software to enable the collection and processing of the data received by the hardware,
applications to generate business benefits from the data gathered and services to implement the solution
in the customer’s environment.
The RTLS division supplies location tags which are either attached to an asset directly (direct tracking)or to the equipment handling the asset (indirect tracking). These location tags are extremely durable andtransmit UWB radio signals to a network of Ubisense’s fixed sensors and mobile detectors which then11

AR Anx 1 –6.1.2

use the incoming signals to locate the position of the tags. These positions can be used to trigger events(such as when an asset enters or exits a particular area) and the positions and events can be represented
graphically, in real-time, in interactive 2D and 3D models using the Group’s proprietary software. The
Group’s applications, implemented on top of the core system, enables, amongst other things, Ubisense’s
customers to control devices like tools on production lines, track and manage assets across large indoor
factory areas and match the actual assembly progress against plan. Typical benefits are reductions in cost,
improvements in efficiency and quality and reduction of work in progress.
The use of UWB and the Company’s proprietary sensor technology results in solutions which display ahigh level of accuracy and reliability in difficult manufacturing environments where alternative radio
technologies and systems often fail. The tags and sensors have been proven to operate reliably aroundthe clock which is a sought after requirement in a number of the markets in which the Group operates.
The software applications implement the customer’s business rules using the location data and events
generated by the RTLS ensuring that deployments are rapid and cost effective.
Ubisense’s RTLS technology has successfully been adopted within the automotive industry by several
large scale manufacturers (including BMW and Aston Martin) and within the aerospace industry by the
EADS Group (notably Airbus). The adaptability of Ubisense’s RTLS means that the Group has also wonorders from the transport industry with the likes of Amtrak, Chicago Transit Authority and Metro Transitof Minneapolis-St-Paul, US. Ubisense’s RTLS tags may also be worn by people and have, for example,
also been adopted by various departments of the US and French military for the purpose of analysing
training exercises.

AR Anx 1 –5.1.5

Strategic partnership with Atlas Copco
Atlas Copco is one of the worlds leading industrial tool manufacturers and an estimated one in every
three cars is assembled using Atlas Copco tools.
Ubisense has developed a tool location system (“TLS”) in conjunction with Atlas Copco which allows
tools to be tracked, either in a production line as they are being used on the item being manufactured, or
located in a stationary environment. TLS is fully integrated with the Atlas Copco Tools Talk system andis marketed by Atlas Copco as part of their product line. Atlas Copco, supported by representatives fromUbisense, have been launching the product to Atlas Copco’s 1,000 strong sales staff globally. Throughthe Atlas Copco relationship, new contracts have been won and pilots are currently being conducted orare planned to commence shortly with Daimler, GM, Hyundai Kia and Audi. The Directors believe that
there is significant opportunity to leverage Atlas Copco’s brand, customer base, sales channels and on-site
support to accelerate growth in the manufacturing sector.
Case Study: BMW
Introduction:
Ubisense has been working successfully with IBS AG, a supplier to BMW Group, since 2007 and has
successfully integrated the Company’s RTLS solution with IBS’s tool management system. This combined
solution has already been deployed at two major BMW assembly plants, the Regensburg plant in Germany
and a new assembly line at the Spartanburg plant in South Carolina, US.
The first BMW plant to be installed with the RTLS technology was the assembly plant line in Regensburg
in 2007 and 2008. Ubisense has subsequently delivered additional components and system upgrades at
Regensburg. Regensburg therefore represents an established example of RTLS adoption and the Directors
believe it is one of the best examples of the Company’s RTLS solution for the automotive industry.
BMW Regensburg:
Ubisense’s RTLS solution automates the programming of tools with the correct settings required for the
specific cars that are currently being assembled. The RTLS enables BMW to both track the location ofeach car and tool to a very high level of accuracy throughout the 1.7km of assembly line at the plant, andto correctly associate tools and cars with an error rate of less than four parts per million. As vehicles on
the line are situated very close to one another and multiple tools can be used on a single vehicle at thesame time, extremely precise location of both tools and cars on the assembly line is required to ensure
correct tool-to-car association. The length of the assembly line required approximately 390 Ubisense12

AR Anx 1 –5.1.5

sensors to be installed to implement the RTLS solution. When the empty shell of a car body enters theassembly process, an employee places a Ubisense UWB RTLS tag on the vehicle’s bonnet and the system
links the unique vehicle identification number and the unique ID of the Ubisense tag. As the car travels
along the assembly line, UWB radio signals are transmitted by the tag and are picked up by the networkof sensors, which measure the time-difference-of-arrival and angle-of-arrival of the signals to calculate
the precise position of the tag and the car with which it is linked.
Similarly, tags are attached to the tools used along the line, and their signals allow the precise positionsof the tools to be found. By comparing the location of tools and cars, the Ubisense system determines
which tools are being used to assemble which cars, and passes this information to the existing IBS
tool-control system, which then sends the appropriate instructions to the tools being used on each car.
At the end of the line, once the factory’s quality-control department has approved a vehicle, the tag is removed
and the BMW emblem is placed on the bonnet in its place. The tag can then be reused on another car.
Now that the infrastructure is in place BMW can also use the location data for additional purposes,
such as tracking the location of a vehicle sent back for servicing or adjustments after assembly has
been completed.
Changes to the production line at Regensburg are accommodated with additional consultancy fromUbisense. To date, system updates, purchases of additional tags and product maintenance have provided
the Company with a significant additional source of revenue. The system has been operational for
production at the plant since installation was completed in 2008.
Other BMW Opportunities:
In addition to Regensburg, the Ubisense RTLS was installed in the Spartanburg assembly plant in South
Carolina, US in June 2010 in one of its assembly halls. In 2011, the system is being installed in a second
assembly hall in Spartanburg. Ubisense expects further system updates, the purchase of additional tags
and product maintenance to generate future additional revenues for the Group.
During 2011, the Group’s RTLS solution is expected to be rolled out to a further two assembly plants:
the Mini assembly plant in Cowley, Oxford and the Shenyang plant in North East China. In March 2011,
together with its partner IBS AG in Germany, the Group entered into a Global Licence Agreement with
the BMW Group which defines the framework for the Group’s RTLS products to be integrated into
BMW’s final assembly plants around the world.
The BMW Group has a further 7 assembly facilities, predominantly in Europe, in which the Ubisense
RTLS could be deployed. These assembly plants, in aggregate, manufacture over 690,000 cars and100,000 motorcycles per annum. The Directors believe that the success with BMW could be replicatedacross many of the other major automotive manufactures as well as other high value industrial processes.
Case Study: EADS Group
Since early 2007, Ubisense has been working closely with several EADS Group companies including
Airbus and Eurocopter, and total sales to the EADS Group are growing. In 2009, agreement was reachedwith the EADS Group for a global framework covering the provision of products, managed services andsupport for a period of five years.
Ubisense’s RTLS technology lends itself well to aerospace manufacture. This industry involves large,
expensive component assemblies which are currently tracked manually around factories using barcode
technology to record their current status within the manufacturing process. This approach results inexcessive time being spent identifying their location and makes the process susceptible to human error.
In addition, the tools required to assemble aircraft are used throughout the factories and can easily getmisplaced, so time is typically wasted locating them when they are needed. By using the Ubisense RTLS
system to replace manual barcode scanning of component assemblies, Airbus can track the actual progressagainst the planned progress of these items through the production process, allowing them to optimise
the production process and better determine lead time for assembly completion. The same infrastructure
allows them to find tools tagged with Ubisense UWB tags.

13

Ubisense has now delivered its RTLS product (as a managed service) to provide a location solution for
major component assemblies across Airbus’ Broughton, St. Nazaire and Hamburg plants, which aremonitored from the final assembly plant in Toulouse. The solution provides accurate location tracking,process tracking and analysis, component tracking, and configuration and integration. Ubisense has, todate, sold RTLS products for use in the assembly process of the A380, A400M, A350 and has also
undertaken a pilot for Eurocopter.
Ubisense currently has up to five staff dedicated to supporting the relationship with EADS Group
companies and the Directors believe that there is a large opportunity to gain significant further revenue
from this relationship. In particular, Ubisense is working closely with Airbus to explore ways in which
its RTLS solution can be used to enhance the assembly process of new aircraft. In addition Ubisense isworking more closely with other major EADS Group companies such as Eurocopter and Astrium (EADS’satellite division). It is anticipated that further contracts with EADS Group companies could beconsiderable and, in turn, could require significant amounts of working capital to both win andsubsequently execute.
The Geospatial division
Ubisense’s Geospatial division uses the Group’s expertise in location solutions to manage some of thelargest and most complex Geospatial projects worldwide on software and hardware platforms that are
not proprietary to the Group, most notably and significantly those of GE Smallworld.
The Geospatial consulting services team, consisting of around 56 permanent members of staff and up toa further 50 contractors, has offices in Germany, the US and Canada and this enables multi-territory
projects to be supported. The division serves the utilities, telecommunications and petrochemicalindustries, providing consulting and solutions, including integration with other enterprise systems, aroundlocation data. The Company’s team of software engineers provide all aspects of Geospatial development
and support services including: planning, project management, implementation, custom applications,upgrades, test automation, training and system management.
The Group’s employees are experts in location solutions and its application to real-world problems.
Practically, this involves consulting on one or all of the following areas:
Software installation
Ubisense has a number of consultants dedicated to the GE Smallworld technology suite in North America
and Europe and has one of the leading GE Smallworld delivery teams. Its consultants each have between
five and fifteen years of experience with the GE Smallworld product suite across a broad range ofindustries and applications, as well as direct involvement on GE Smallworld product development teams.
GE Smallworld’s software is used by businesses to digitize, map, manage and analyze their network
components and data. GE Smallworld has a customer base that spans electric, gas, nuclear and thetelecommunications markets where the software is well-entrenched and critical to the operations of a numberof its customer companies.
The Geospatial division is uniquely positioned to service the GE Smallworld customer base as a numberof key employees at Ubisense were employees of Smallworld prior to its acquisition by GE Energy in2000 (including Richard Green who was a founder of Smallworld).
Analysis of data
The Group is able to increase the benefit of the data collated by the software platform byimplementing changes to existing system configurations as well as advising on new application areas
or integration possibilities.
Once the data is obtained, the next step is to view the results. With the arrival of Google, Microsoft andothers into the mapping space, there has been something of a geospatial industry revolution, providing
greater availability of rich datasets, including base maps, satellite imagery, streetview imagery and traffic
information. This is combined with ease of use, improved scalability, and lower costs for“simple” applications.

14

AR Anx 1 –6.1.2

Ubisense offers the ability to integrate its customers’ geospatial data with technologies like Google Maps.
This can be a modular solution that will facilitate the implementation of multiple technologies and use
open source solutions such as OpenLayers, combined with multiple spatial data repositories, including
GE Smallworld (GSS), Oracle, PostGIS or cloud-based solutions. Ubisense myWorld provides the world
on Google Maps. Geospatial data, outage information, work orders, and other information from acustomers enterprise system can be overlaid on the familiar Google Maps base. End users from all levelsof an organization can access geospatial information from any internet enabled device.
Managed services
As applications become increasingly complex, the knowledge of staff required to operate them for
maximum overall value continues to grow. Building and retaining the technical knowledge base required
to maintain an enterprise geospatial product is a major challenge in today’s economic environment andIT organisations are being pressed to take on more responsibilities with fewer staff.
Ubisense offers its customers the option of a managed service which applies a service level based
approach to operating and maintaining applications providing ongoing maintenance, management,
conversion, enhancement and support of an application portfolio.
Through this managed service offering, Ubisense augments its customers’ teams with the mostexperienced consultants. The managed service approach is designed to provide a vehicle for Ubisense towork with its customers’ IT organisations to manage the operation of their system, with appropriate
expertise and best practices from both teams melded into the final solution.
This business has been a consistent cash generative division of the Company and has provided blue chipcustomers, such as Duke Energy, Swisscom and HLBG, with long term managed service contracts, eachof which have the potential to be leveraged by the RTLS division.
The Geospatial division’s current customer base includes Deutsche Telekom, Swisscom, HLBG, GE,
ExxonMobil, Duke Energy, Atmos, Cox, Cablevision, Exelon, Dominion and UGI.
Case Study: Deutsche Telekom
An example of Ubisense’s expertise can be seen in its relationship with Deutsche Telekom. Ubisense hasa team of over 30 people implementing multiple projects for Deutsche Telekom, including the replacementof a legacy system to manage fibre network, an advanced network planning system supporting roll-out offour million new Fibre-to-the-Home connections by the end of 2012, maintaining the database containing
Deutsche Telekom’s entire access network and the outsourced training of 3,000 engineering users.
The Geospatial division has worked with Deutsche Telekom for over 6 years and has significant recurring
revenue from this customer. Revenues have increased from £1.0 million in 2008 to over £3.7 million in 2010.
4.
Key strengths of the Group
Platform
The Group has a secure platform on which to develop its business and has progressed to date by leveraging
the profitable, cash generative Geospatial business whilst developing its RTLS technologies. The
Geospatial contracts typically have a duration of 1-2 years and a substantial number of those contracts
are recurring. The revenue generated by the Geospatial business has allowed Ubisense to reduce its needfor outside investment in the early stages of its development.
Customer Base
Ubisense has large manufacturing and industrial companies in its existing customer base. The Directors
believe considerable opportunities exist for further revenue generation within its current customer baseby developing global framework contracts (as has been done with BMW). Key customers of the Group’s
RTLS division include:•

Atlas Copco, a strategic partner with an OEM contract and Atlas Copco has installations in almost
every automotive manufacturing plant around the globe

15

AR Anx 1 –5.1.5; 6.1.1

•

EADS has selected Ubisense’s product as its strategic RTLS and several Airbus programs including
the A380, A350, A320 and A400M have begun deployments•

BMW Group, where BMW has installed Ubisense’s product in a number of its plants

The Geospatial division has high customer loyalty not least because the cost of a customer switching toan alternative software provider is often prohibitive due to the large effort and unreliability of migrating
data to a new software package. Key customers of the Group’s Geospatial division include:•

Deutsche Telekom, where Ubisense is its strategic network partner•

Duke Energy, where Ubisense is its strategic network partner

Reputation
Ubisense’s RTLS product is proven in industrial environments and Ubisense currently has numerous blue
chip customers and has received a number of awards in recent times including:•

DTI Smart Award 2003 & DTI R&D Grant 2004•

EU FP7 project awards•

Frost and Sullivan – Product Innovation of the Year 2007•

RTLS won 2009 “Best British Inside” DTI iAward•

IET 2009 innovation finalist•

Ranked 8th in the Sunday Times Microsoft Tech Track 100 2009•

Deloitte Technology Fast 50 for the third successive year•

Richard Green – Ernst & Young Science and Technology Entrepreneur of the Year 2010•

Business Weekly – International Trade Business of the Year 2010•

Cambridge Computer Ring – Business of the Year 2010

Management
The Board has experience in growing early stage technology businesses into successful and profitablecompanies. Several members of the Board have previously founded, grown and then subsequently soldtechnology businesses. The Directors intend to apply the experience and knowledge they have gained witha view to driving the Group’s future corporate growth and increasing shareholder value.
Experience
A number of employees of the Group have over 20 years of experience in the location solutions space
and its technology is backed up by highly skilled and experienced consultants.
Technology
The Directors believe the Group’s RTLS product is currently one of the most accurate and reliable solution
available to support high value manufacturing and industrial processes indoors. The Directors believe
competing technologies do not currently provide a solution as accurate and reliable as Ubisense’s RTLS
product.
Intellectual Property
Ubisense has assembled a considerable set of proprietary intellectual property relating to its RTLS
product. This set includes patents (both granted to the Company and licensed by the Company), trade
secrets and know-how, and trademarks. This intellectual property serves to act as a barrier to prevent
other companies from easily and/or quickly developing systems which match the performance andreliability of Ubisense’s RTLS.

16

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AR Anx 1 –6.4

Ubisense has been granted three patents relating to its RTLS technology and applications thereof in the
US (for a “System for detecting intruders in a populated space”, a “Location device and system using
UWB and non-UWB systems”, and a “Location system”). Ubisense has also been granted equivalent
patents in Europe for the “System for detecting intruders in a populated space”. In addition, the Company
has applied for a number of patents worldwide to protect important aspects of its RTLS technology.
The Company has also licensed a number of patents from Cambridge Consultants Limited (a company
owned by Altran Technologies) which include the patents relating to the UWB sensor. These licenses
have been granted until 31 December 2025.
Application into other markets
Although Ubisense’s RTLS technology has, to date, been most widely accepted by large scale industrial
manufacturers and transport companies, the technology has also been used in other environments suchas agriculture (dairy animal welfare) and theatre. The Directors believe Ubisense’s technology could be
increasingly adopted into a variety of new markets such as energy, defence, security, healthcare, retail,sport and shipping.
5.
Market size
RTLS
The Directors believe that the market for indoor dynamic RTLS has the potential to grow rapidly. A study
by IDTechEx in 2008 stated that the RTLS market could be worth over $2.7 billion by 2018.
Automotive industry
In 2008-2009 alone, an estimated 61 million vehicles were produced in approximately 570 automotive
assembly plants across the globe. With traditional systems delivering an accuracy of several metres in
non-Ubisense plants (accurate enough to identify the approximate parking slot of a vehicle in the car park),
the potential for additional savings by using Ubisense’s far more accurate solution in process control andmonitoring applications are compelling and this represents a significant market opportunity which Ubisenseis well positioned to exploit.
Aerospace industry
The global economic downturn had a significant adverse impact on the aviation manufacturing market
with worldwide shipments of aircraft declining in each of the last three years. This does not reflect thefact that deliveries of large-cabin long-range aircraft remained relatively stable. In 2010, 2,015 aircraft
were delivered to customers around the globe, an average of 5.5 aircraft delivered every day. Total
aggregate revenue for aircraft manufacturers in 2010 was $19.7 billion.
Airbus and Boeing dominate the large jet airliner market, delivering 510 and 462 airplanes respectively
in 2010. Boeing has three assembly lines located at Everett, Renton and North Charlestown, US. The
major Airbus plants are located at Toulouse in France, Hamburg in Germany and Tianjin in China. Parts
for each airplane are delivered to these assembly lines from component manufacturers globally.
The applications of RTLS are wide ranging and Ubisense is well positioned to capitalise on the proven,
expanding RTLS markets with its existing customers and partners and also to diversify and apply thetechnology to new markets.
Geospatial
Traditional GIS provides mapping, geocoding, routing and reporting alongside a service and consulting
offering. The worldwide market for GIS/Geospatial services in the telecommunications and utility sector
was estimated at being worth US$490 million in 2010 and is expected to grow to US$522 million in
2011. The static outdoor location technology market that the Geospatial division covers is estimated to
be worth more than $5 billion by 2018 (source: Daratech).
Ubisense has a strong relationship with GE Smallworld, a market leading player in the telecommunication
and utility markets. Smallworld provides the foremost Geospatial solution for sophisticated utility network
applications and accounts for an estimated 38.7 per cent. of that market (source: Daratech). Integration,
through Smallworld, with software such as Google Maps and the ability to operate Ubisense myWorldon smart phones and tablets gives Ubisense a strong competitive position in a rapidly developing market.
176.
Competition
Whilst GPS-based tracking solutions work well outdoors, they are not well suited for indoor use because,in order to operate with reasonable accuracy, they require a line-of-sight to satellites.
In indoor environments, there are three types of location solution which are commonly used
for tracking:•

Passive RFID systems which locate the presence of a tag in close proximity to the location of thesignal reader/energiser. Transport for London’s Oystercard is an example of this kind of‘chokepoint’-type solution.

•

Dedicated active identification systems using radio or ultrasound to determine proximity of a tag
to a reader over a longer distance. These systems, sometimes categoriesed as “active RFID” candetect the presence of a tag some distance (e.g. 30 metres) away from the reader(s).

•Active identification systems which ‘piggy-back’ on existing wireless services, such as WiFi.
Signals from the network participants (e.g. WiFi cards) are monitored to determine their location
relative to the basestations (which normally have been installed for communications purposes).
Although in principle these systems can re-use existing indoor communications infrastructure
for location purposes, they again are typically unable to provide a precise location for objects
inside buildings.

7.
Ubisense’s technology
The existing technologies described in section 6 above can typically track an object to within a
few metres, however Ubisense’s precise tracking differs because it is able to track objects to withinjust 15 cm (6 inches). The multiple sensors in the Ubisense RTLS operating environment enable
tracking in three dimensions and the Board believes that UWB based RTLS delivers reliable accuracy
together with the ability to track resources in real-time in three dimensions.
Wireless technology can be used to continuously determine and track the location of assets and personnel
in real-time. Ubisense’s RTLS solution typically utilises battery-operated radio tags and a cellular locating
system to detect the presence and location of the tags using angle-of-arrival and time-difference-of-arrival
measurement technology. Ubisense’s locating system is usually deployed as a matrix of locating devices(or sensors) that are installed at a spacing of anywhere from 20 to 100 metres depending on the sitelayout. These sensors determine the locations of the radio tags.
Ubisense tags employ a unique dual-radio architecture. Tags transmit UWB radio pulses, which are used
to determine location, and have a conventional bi-directional 2.4GHz radio which is used as a control
and telemetry channel.
The Ubisense RTLS solution consists of the following four major components:
•

tags;

•

sensors;•

location platform; and•application software.

Ubisense tags are small rugged devices specifically designed for use in harsh industrial environments,
or other specific applications, and are attached to the object to be tracked. The Group supplies a numberof different tags (e.g. Compact Tag, Slim Tag, Industrial Tag, Intrinsically Safe Tag, Tool Tag and Tag
Module). The tags have controllable update rates from as fast as 33 updates per second to as slow as one
update every 7 minutes. Update rates can be varied in real time by application programs in response to
tag activity or external events. Ubisense tags include a sensitive tremble switch that enables a “sleepmode”. Using sleep mode, a tag consumes almost no battery when stationary, but can be tracked manytimes a second when moving.

18

Ubisense sensors (e.g. Series 7000 sensor with various ingress protection (IP) ratings) contain an arrayof antennas and UWB radio receivers to calculate the location of the tags based on reception of thedetected UWB signals transmitted from the Ubisense tags. The sensors pass the location information
they generate over standard Ethernet networks to Ubisense’s platform software which manages andprocesses the information to generate application-relevant spatial events (such as “Tool X is now being
used to assemble Car Y”).
Cellular techniques through the hardware and software architecture help the system maintain the required
real-time response even when large numbers of location events are being processed. The software service
elements run on Microsoft Windows (XP, Vista or Windows 7) or Linux, and the platform presents a .NET
API that allows easy development of location-driven applications that use the Ubisense RTLS.
Ubisense’s UWB tracking systems use combined angle-of-arrival and time-difference-of-arrival measurement
technology. When compared with competitors’ systems, that use only time-difference-of-arrival technology,
Ubisense gathers more readings from each sensor for better error elimination and higher accuracy. Ubisense
also provides systems operators with full visibility of sensor operation. Ubisense tools display all sensor
readings graphically in 2D or 3D, and simulate the effects of configuration changes, making it easy to spot
errors and optimise performance.
8.
Business strategy and future opportunities
Ubisense’s business strategy is to build upon its existing customer relationships and secure new customer
relationships whilst expanding and diversifying its RTLS and Geospatial offerings.
RTLS
There are an estimated 570 automotive assembly plants worldwide which produced an estimated
61 million vehicles produced globally in 2008-9. Multiple options of the same model mean that there
are enormous possible production variants leading to increased potential for human error or sub-optimal
process efficiencies. As such, the Directors believe there is a significant opportunity to increase thepenetration of the Group’s RTLS offering within the automotive sector by leveraging its existingcustomers as well as targeting new manufacturers seeking cost savings and efficiency improvements. For
example, BMW currently uses Ubisense’s RTLS systems in two of its assembly plants and is due tocommence installation in its Shenyang plant in China and has recently begun in the Mini plant at Cowley,
Oxford. The Group, together with its partner IBS AG in Germany, recently signed a global licenceagreement with BMW which will mean that the Group has the framework to provide RTLS to all assemblyplants across the BMW Group.
The opportunity also exists to target new customers, including, Daimler, GM, Hyundai Kia and Audi
through the strategic partnership that the Group has developed with Atlas Copco. The Group’s ability toleverage Atlas Copco’s brand, customer base and sales capabilities will be important in maximising thevalue from the strategic partnership. Through its relationship with Atlas Copco, the Company is carryingout pilot schemes with Daimler at its Rastatt assembly plant, with GM at its Lansing plant, with Hyundai
Kia at its Montgomery assembly plant and with Audi in Ingolstadt and Neckarsulm. In total, Daimler has
12 assembly plants, GM has 19 assembly plants, Hyundai Kia has 10 assembly plants and Audi has
6 assembly plants (although Audi is part of the much larger VW group which the Group also intends totarget). Additionally, Ubisense and Atlas Copco are in discussions with other major motor manufacturers
such as Ford and Volvo.
Beyond the automotive industry, Ubisense is seeking to expand on its existing relationship with Airbus
and its ultimate parent company EADS Group. The Group signed a framework agreement in 2009 which
set out strategic purchasing conditions. Specifically, Ubisense is currently in discussions with EADSGroup regarding extending the RTLS solution into further sites as well as further work for Eurocopter in
asset management.
The Directors believe that, having seen the beginnings of significant demand for high precision location
solutions within the automotive industry, that this trend will not only continue within that industry but
will continue to expand to other industries, such as the aerospace and transport industries, and that thiswill provide the Group with significant opportunity for growth.
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Ubisense’s RTLS solutions have the potential to be used extensively in a number of different areas forexample, in agriculture, military training, logistics and health and safety. Ubisense has also foundopportunities for its technology in the nuclear power industry (where managers overseeing nuclear
clean-up decommissioning work can use the location technology combined with their existing technology
to map radiation profiles and provide information to plan work assignments).
Ubisense’s RTLS has also been deployed in areas as diverse as military training and simulation of urban
combat, tracking and analysing hospital patients movements to help diagnose early dementia, assist withrehabilitation from brain injuries, to record biological and cognitive reactions to pieces of art in a Swissmuseum and to identify potential customers at international trade shows. Additionally, Ubisense’s RTLS
solution has been used to track opera singers to optimise sound balance in the O2 Arena.
Geospatial
The Geospatial division remains an integral part of the Group’s business and the Group will seek to growthis business over the medium term. The Geospatial division will aim to establish a leadership positionin the geospatial industry and look to continue to grow revenues through accretive investment in newgeographic territories and complementary intellectual property.
9.
Reasons for the Placing and use of proceeds
The net proceeds of the Placing receivable by the Company are expected to be approximately £4.2 million
and are intended to be used as follows:(i)to repay the Company’s outstanding debt facility;(ii)

to market and develop new relationships;

AR Anx 3 –3.4
AR
Anx 3 – 8.1(iii) to allow the development of additional intellectual property in the Group; and(iv)

to allow the Group to develop, if relevant opportunities arise, through selective acquisition
opportunities.

10. Board of Directors and Senior Management
Professor Andrew Hopper CBE– Non-Executive Chairman (aged 58)
Andy is one of the foremost leaders in the technology industry having co-founded twelve successfulcompanies, including Acorn Computers Limited acquired by Olivetti, Virata, Inc. listed on NASDAQ,
Adaptive Broadband Limited, acquired by California Microwave, Inc., Cambridge Broadband Limited,
Level 5 Networks and RealVNC Limited. Andy is the Professor of Computer Technology and is currently
Head of the University of Cambridge Computer Laboratory and a member of the University’s Council.
Andy has worked on location systems for over 20 years. He was elected as a Fellow of the Royal Society
in 2006 and the Royal Academy of Engineering in 1996. Andy was made a CBE in 2007 for services tothe computer industry.
Richard Terence Green – Chief Executive Officer (aged 53)
Richard initially trained as a mechanical engineer and has over twenty-five years of experience in thesoftware industry. Having established Smallworld as one of the leading geographic information systemcompanies serving utility and telecoms companies in Europe and the US, the company subsequently
listed on NASDAQ in 1996 and was acquired by GE in 2000 for $214 million. Richard was Ernst &Young UK’s Science and Technology Entrepreneur of the Year in 2010. Richard is a Fellow of the Instituteof Mechanical Engineers and sits on the Institute of Mechanical Engineers Manufacturing Industries
Board. He is also Entrepreneur in Residence at Judge Business School, Cambridge and a Fellow of theRoyal Society of Arts.
Gordon Michael Campbell – Chief Financial Officer (aged 43)
Gordon is a Fellow of the Institute of Chartered Accountants in England & Wales. After qualifying with
Deloitte in 1995 he moved into the technology industry with Smallworld, where he was part of the team
involved in the NASDAQ listing. After leaving Smallworld in 2000 he joined UbiNetics, a 3G telecoms
technology company and spin out from PA Consulting, where he was involved in private fundraisings
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Anx 1 –
16.2

of £65 million. Gordon joined Ten Sails LLP in 2004 which merged into Ubisense in 2005 and hebecame CFO in 2009 and joined the board in 2010. He has an M.A. in Engineering from the Universityof Cambridge.
Peter George Harverson – Non-Executive Director (aged 65)
Peter has held a number of senior international sales and marketing roles in the IT industry. These included
Regional Director, Intel Corporation and Vice President Europe, Cadence Design Systems. In 1995 he joined
Sun Microsystems where he was responsible for the development of the company’s European Corporate
Accounts programme. More latterly he became Director of Services Sales – EMEA with a charter to develop
new areas of business, including professional services. Peter retired from Sun Microsystems in December
2005. Currently, Peter is a non-executive director of each of Brady plc and CRFS Limited, and a non-executive
director and chairman of each of eoSemi Limited and Aspex Semiconductors Limited. Peter is also an adviser
to Pulsic Limited and Cambridge IP Limited.
Jonathan Keith Lomas – Non-Executive Director (aged 41)
Keith has more than eighteen years senior management experience in both small and medium sized
entrepreneurial and extensive multinational companies. Keith was appointed Managing Director of CLPL
in 1996 and, after leading the successful acquisition of UltraVision International in 2003, Keith wasappointed as President and CEO of the UltraVision CLPL group. The combined group is one of thelargest independent manufacturers and suppliers of contact lenses in Europe. Prior to his involvement in
the contact lens world, Keith was an investment banker at S.G. Warburg, Kleinwort Benson and Daiwa
Europe. Keith is an active investor in other technology start-up companies. Keith accepted the Queen’sAward for Enterprise: Innovation 2006 and 2010 on behalf of UltraVision CLPL.
Dr Richard Gordon Newell – Non-Executive Director (aged 68)
Dick has spent over 30 years in the software industry in Computer aided design (CAD) and
Geographic Information Systems (GIS). He co-founded his first company, Cambridge Interactive
Systems Limited (CIS) in 1977. CIS was part of what became known as ‘The Cambridge
Phenomenon’. Dick was a co-founder of Smallworld in 1988. Dick was Chairman of both CIS andSmallworld. He was the original project manager of PDMS, a core product of AVEVA Group plc andis also a Non-Executive Director of UltraVision CLPL.
Dr Robert Daniell Sansom – Non-Executive Director (aged 51)
An active angel investor and mentor to start-ups, Robert is founder of the Cambridge Angels, a group of
seasoned technology and bio-technology entrepreneurs who invest in and mentor technology start-ups in
the Cambridge area. Previously, Robert was co-founder, CTO and Director of FORE Systems, Inc, aleading provider of networking equipment. FORE was listed on NASDAQ in 1994 and subsequently
acquired by Marconi for $4.5 billion in 1999. Additionally, Robert served as the Chief Technology Officer
at Marconi in 1999. Robert is a member of the board of directors of Azuro, Inc., CRFS Limited, Fetch
Inc., Moviestorm Limited and Netronome Systems, Inc. He holds a Ph.D. in Computer Science from
Carnegie Mellon University and an M.A. in Computer Science from the University of Cambridge.
Paul Ronald Taylor – Non Executive Director (aged 46)
Paul Taylor is a Fellow of the Association of Chartered Certified Accountants. Paul joined AVEVA GroupPlc in 1989 and was heavily involved in the flotation process and was responsible for UK accounting
and for the development of AVEVA’s overseas subsidiaries including adherence to group standards.
Between 1998 and 2001, Paul was also UK Director of Human Resources and was appointed to theposition of Finance Director and Company Secretary of AVEVA Group plc on 1 March 2001. Before
joining AVEVA, Paul trained within the accountancy profession before moving to Philips
Telecommunications (UK) where he was responsible for the management accounts of its Public Sectors
division. Paul was a recipient of the FTSE250 Finance Director of the Year award and is also a
Non-Executive Director of Anite plc.

21

Management:
Andrew Ward – VP Engineering and Chief Technology Officer
Andy is a founder of Ubisense and an experienced location system engineer having designed, built andworked with in-building location systems for over 18 years. Andy has also pioneered research into the useof Ultra-Wide Band radio for sensor systems and led the ‘Location Technology’ project at AT&T
Laboratories Cambridge. Based on his work, he has been granted 11 patents over the past ten years. Andy
has a PhD in Sensor Driven Computing from the University of Cambridge and is a Chartered Engineer.
Joerg Poswig – Vice President Geospatial
Prior to joining Ubisense to set up the Europe and Asian operations team, Joerg’s experience included
running a large (£30 million) GIS project for Deutsche Telekom. He also ran the European service
activities of a business within GE Energy, responsible for 150 Project Managers and Consultants acrossEurope. Joerg has a PhD in Computer Science from the University of Dortmund.
Russell Chandler – Vice President RTLS
Russ joined Ubisense in 2007 to lead the Group’s Americas operations. During the 1990’s he founded
GeoData Solutions, which grew into one of the leading systems integration and application development
firms for GIS and related technologies around the world. He served as President and CEO until thecompany was sold to Navigant Consulting in 1999 and was later combined with Smallworld Systems
and acquired by GE. From 2002 until 2007, Russ was President and CEO of TimeCentre, Inc., a leading
provider of human resource information systems. Russ has a Masters Degree from San Diego State
University and a Bachelors Degree from the University of Colorado, Boulder.
Terence Phebey – Vice President Sales & Marketing
Terry joined Ubisense in 2004 to lead the European and Asian sales activities. During the 1980’s Terryoccupied several management positions in Germany and the US at Computervision (now ParametricTechnology Corp.). Following this he joined Smallworld in 1991 and built up the German subsidiaryfrom inception driving growth to become market leader with 160 people. Smallworld was sold to GE in
2000 and Terry then lead a European Sales team as Sales Director for a division of GE Energy. Terry has
a BA in Mathematics from Oxford University.
Jane Collins – Head of Human Resources
Jane joined Ubisense in 2008 with over 20 years of experience in human resources at both large bluechip corporations and small technology companies. Prior to joining Ubisense she was the HR Manager
for Smallworld and subsequently responsible for the GE Energy Services European Sales Team following
the GE acquisition of Smallworld. Jane has a post-graduate diploma in Human Resource Management.
11. Current trading and prospects
The Group has continued to trade in line with its expectations from 31 December 2010 to the date ofthis document.
RTLS
Following establishment of a global licence agreement, Ubisense has been engaged to deploy its RTLS
solution in the BMW assembly plants at Cowley, UK (for the Mini), and Shenyang, China. This is inaddition to further RTLS implementations at Spartanburg, US. Orders driven by the Company’s strategic
relationship with Atlas Copco have also resulted in installations for Toyota, General Motors, Fiat, VW,
Honda and Hyundai.
Deployments of Ubisense’s Visible Industrial Process (VIP) and asset management software across sites
at Airbus and Eurocopter, under a framework agreement with the EADS Group, have prompted thecreation of a new subsidiary, Ubisense SAS, in France. Additional staff have been recruited in Toulouseto support the installation and deployment across the EADS Group in Toulouse, Marseille and St Nazaire
in France and Hamburg in Germany.
New staff, including John Lawson from Cooper Tools and Lyndsey Heavner from Accenture, have been
hired to bring further relevant industrial business expertise in the automotive and aerospace markets.
22

AR Anx 1 –12.1; 12.2

Geospatial
First sales of myWorld by the Geospatial division to Dominion have been secured and a promising pipelineof potential customers has been identified during the recent GE Energy symposium in Salzburg. Additional
staff have been hired in the Geospatial division in the US and Germany, whilst additional orders from Deutsche
Telekom and Swisscom, along with orders from Atmos Energy have bolstered the Company’s order book.
12. Corporate governance
Combined CodeThe Directors acknowledge the importance of the principles set out in the UK Corporate GovernanceCode. Although compliance with the UK Corporate Governance Code is not compulsory for AIM
companies, the Directors intend to apply the principles as far as practicable and appropriate for a publiccompany of this nature and size. The Board also proposes to follow, as far as practicable, therecommendations on corporate governance of the Quoted Companies Alliance for companies with shares
traded on AIM. Details of certain of the main features of the Company’s corporate governance procedures
which will be effective from Admission are set out in paragraph 9 of Part 4 of this document (which, as
noted in such paragraph, will not at Admission be fully compliant with the provisions of the UK Corporate
Governance Code).
The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and corporate
actions. Following Admission, the Directors intend to hold Board meetings 10 times in each year.
Board Committees
The Board has established an audit committee, remuneration committee and nomination committee, withformally delegated duties and responsibilities and with written terms of reference, as further describedin paragraph 9 of Part 4 of this document. From time to time, separate committees may be set up by the
Board to consider specific issues when the need arises.
Audit Committee
The Audit Committee assists the Board in discharging its responsibilities with regard to corporate
governance, financial reporting and external and internal audits and controls, including, amongst otherthings, reviewing the Company’s annual financial statements, reviewing and monitoring the extent of the
non audit services undertaken by external auditors, advising on the appointment of external auditors andreviewing the effectiveness of the Company’s internal controls and risk management systems. The ultimate
responsibility for reviewing and approving the annual report and accounts and the half yearly reports
remains with the Board.
The membership of the Audit Committee comprises Paul Taylor, Keith Lomas and Dick Newell with
Andy Hopper as an observer, and is chaired by Paul Taylor, who is considered by the Directors to haverecent and relevant financial experience. The Audit Committee will meet formally at least four times
every year and otherwise as required. The Audit Committee will meet with the Company’s external
auditors at least once each year.
Remuneration Committee
The Remuneration Committee is responsible for establishing a formal and transparent procedure fordeveloping policy on executive remuneration and to set the remuneration packages of individual Directors.
This includes agreeing with the Board the framework for remuneration of the Chief Executive, all otherexecutive directors, the company secretary and such other members of the executive management of theGroup as it is designated to consider. It is furthermore responsible for determining the total individual
remuneration packages of each Director including, where appropriate, bonuses, incentive payments andshare options. The remuneration of non-executive directors will be a matter for the executive membersof the Board. No Director may be involved in any decision as to their own remuneration.
The membership of the Remuneration Committee comprises Peter Harverson, Keith Lomas, Robert
Sansom and Paul Taylor with Andy Hopper as an observer, and is chaired by Peter Harverson. The
Remuneration Committee will meet at least twice a year and at such other times as the chairman of thecommittee shall require.
23

Nomination Committee
The membership of the Nomination Committee is responsible for leading the process for board
appointments and making recommendations to the Board to implement a formal and transparent
procedure for the appointment of new directors to the Board.
The Nomination Committee comprises Robert Sansom, Dick Newell, Peter Harverson and Andy Hopperand is chaired by Robert Sansom. The Nomination Committee will meet at least twice a year and at suchother times as the chairman of the committee shall require.
Share dealing code
The Company has adopted and will operate a share dealing code for Directors and applicable employees
in order to ensure compliance with Rule 21 of the AIM Rules for Companies and will take proper steps
to ensure compliance by the Directors and those applicable employees (as defined in the AIM Rules
for Companies).
13. The Placing and the Additional Shares
Under the Placing Agreement, Canaccord Genuity has agreed, as agent for the Company, to use reasonableendeavours to procure placees for the New Placing Shares at the Placing Price. Further details of the termsof the Placing Agreement are set out in paragraphs 10.2 to 10.6 of Part 4 of this document.
In addition, pursuant to the Selling Shareholder Agreements, Canaccord Genuity has agreed, as agent foreach Selling Shareholder, to use reasonable endeavours to procure placees for the Selling Shareholders
Shares at the Placing Price.
The Placing comprises an aggregate 2,777,778 New Placing Shares being issued by the Company and2,040,089 Selling Shareholder Shares being sold by the Selling Shareholders. Further details of the Selling
Shareholders are set out in paragraph 11 of Part 4 of this document.
The aggregate proceeds of the Placing of the New Placing Shares will be approximately £5.0 million
before expenses, of which £4.2 million (net of expenses) will be receivable by the Company. Canaccord
Genuity has received conditional commitments from institutional and other investors for 4,817,867
Placing Shares at the Placing Price.
The Placing is conditional, amongst other things, upon Admission and the Placing Agreement becoming
unconditional and not being terminated in accordance with its terms.
As a result of arrangements entered into between the holders of the Convertible Loan and the Company
and HSBC Bank plc and the Company, on Admission, the Convertible Loan will automatically convert
into 963,320 Ordinary Shares and 115,350 Ordinary Shares will be issued pursuant to the exercise of the
HSBC Warrants. Accordingly, on Admission, the Company will have 21,421,758 Ordinary Shares inissue and a market capitalisation of approximately £38.6 million on the basis of the Placing Price.
Application has been made to the London Stock Exchange for the Enlarged Share Capital to be admitted
to trading on AIM. It is expected that Admission will become effective and that dealings will commenceon 22 June 2011.
The New Placing Shares and the Additional Shares will rank pari passu with the Existing Ordinary Shares
including the rights to all dividends and other distributions declared, paid or made after the date of issue.
The Placing has not been underwritten.
14. The City Code on Takeovers and Mergers (“Takeover Code”)
The Takeover Code applies to the Company. Under the Takeover Code, if an acquisition of interests inshares were to increase the aggregate holding of the acquirer and its concert parties to interests in sharescarrying 30 per cent. or more of the voting rights in the Company, the acquirer and, depending on
circumstances, its concert parties would be required (except with the consent of the Panel on Takeovers
and Mergers) to make a cash offer for the outstanding shares in the Company at a price not less than thehighest price paid for interests in shares by the acquirer or its concert parties during the previous
12 months. This requirement would also be triggered by any acquisition of interests in shares by a person
24holding (together with its concert parties) shares carrying between 30 per cent. and 50 per cent. of thevoting rights in the Company if the effect of such acquisition were to increase that person’s percentageof the total voting rights in the Company.
Further information on the provisions of the Takeover Code can be found in paragraph 16 of Part 4.
15. CREST
Application has been made for all of the issued and to be issued Ordinary Shares to be eligible foradmission to CREST with effect from Admission. CREST is a paperless settlement procedure enabling
securities to be evidenced otherwise than by certificate and transferred otherwise than by written
instrument. Application has been made for the Ordinary Shares to be admitted to CREST with effect from
Admission. Accordingly, settlement of transactions in the Ordinary Shares following Admission may takeplace within the CREST system if the individual shareholders so wish. CREST is a voluntary system andholders of Ordinary Shares who wish to receive and retain share certificates will be able to do so.
It is expected that, subject to the satisfaction of the conditions to the Placing, the Placing Shares will be
registered in the names of the placees subscribing for them and issued or transferred whether:(a)in certificated form, where the placee so elects, with the relevant share certificate expected to be
despatched by post, at the placee’s risk, by 6 July 2011; or(b)

in CREST, where the placee so elects, and only if the placee is a “system member” (as defined in
the CREST Regulations) in relation to CREST, with delivery (to the designated CREST account)of the Placing Shares expected to take place on 22 June 2011.

Pending despatch of definitive share certificates, the Registrars will certify instruments of transfer against
the register. No temporary documents of title will be issued.
16. Lock-in arrangements
Immediately following Admission, the Directors, will be interested, in aggregate, in 5,005,901 Ordinary
Shares, representing approximately 23.4 per cent. of the Enlarged Share Capital of the Company. The
Directors have undertaken to the Company and Canaccord Genuity that, subject to certain limited
exceptions, they will not sell or otherwise dispose of, or agree to sell or dispose of, any of their respective
interests in the Ordinary Shares held immediately following Admission at any time prior to the firstanniversary of Admission.
17. Dividend policy
The Board intends to adopt a dividend policy appropriate to the Company’s financial performance. This
will take into account its ability to operate and grow and the need to retain a prudent level of cash resources.
Any profits are likely to be retained and used towards the development of the Group’s activities andbusiness for the foreseeable future.
18. Share Schemes and Management Incentive Arrangements
In order to incentivise its employees, the Group operates the Share Option Scheme for employees in the
UK and the Equity Incentive Plan for US employees. The Company has also entered into Unapproved
Option Agreements with employees in the UK, Canada and Germany. In all material respects the three
types of arrangement mirror each other. Share options over a total of 2,150,490 Ordinary Shares at exercise
prices ranging from £0.14 to £1.05 per Ordinary Share have been granted to employees and directors of
the Company or its subsidiaries, and remain outstanding. Further details are set out in paragraph 4 of Part 4of this document.
The Board believes that the retention of senior management will be a key driver to the success of theCompany. Consequently, the Company intends to review its employee share option arrangements
following Admission. It is likely that further share options will be granted to incentivise employees. Any
further share options to be granted will be under terms normally applicable to share options granted bycompanies quoted on AIM.
25

AR Anx 1 –20.7

19. Taxation
Your attention is drawn to the taxation information set out in paragraph 15 of Part 4 of this document.
20. Taxation reliefs for investors
The Company has received provisional approval from HM Revenue & Customs that the Placing Shares arecapable of being a “qualifying holding” for the purpose of investment by a VCT.
21. Further information
Your attention is drawn to the further information set out in Parts 2, 3 and 4 of this document. You are advised
to read the whole of this document rather than relying on the summary information set out on page 9 of thisdocument. In particular, the attention of prospective investors is drawn to Part 2 of this document whichcontains a summary of the risk factors relating to an investment in the Company, to Part 3 of this document
which contains historical financial information of the Company and an accountants' report thereon, and to
Part 4 of this document which contains further information on the Group.

26

PART 2RISK FACTORS
An investment in Ordinary Shares involves a high degree of risk. Accordingly, prospective investors
should carefully consider the specific risks set out below in addition to all of the other information
set out in this document before investing in Ordinary Shares. The investment offered in thisdocument may not be suitable for all of its recipients. Potential investors are accordingly advised toconsult a professional adviser authorised under FSMA who specialises in advising on the acquisitionof shares and other securities before making any investment decision. A prospective investor should
consider carefully whether an investment in the Company is suitable in the light of his or her
personal circumstances and the financial resources available to him or her.
The Directors believe the following risks to be the most significant for potential investors. However,
the risks listed do not necessarily comprise all those associated with an investment in the Company
and are not set out in any particular order of priority. Additional risks and uncertainties not currently
known to the Directors or which the Directors currently deem immaterial may also have an adverse
effect on the Group and the information set out below does not purport to be an exhaustive summaryof the risks affecting the Group. In particular, the Company’s performance may be affected by changes
in market or economic conditions and in legal, regulatory and tax requirements.
If any of the following risks were to materialise, the Company’s business, financial conditions, results
or future operations could be materially adversely affected. In such cases, the market price of theCompany’s shares could decline and an investor may lose part or all of his or her investment.
Risks specific to the Group
Technological risks
The Group operates in an industry where competitive advantage is heavily dependent on technology. It
is possible that technological development may reduce the importance of the Group’s function in themarket or render the patents on which it relies redundant. For instance, the Group’s real time location
systems rely on ultra-wideband radio signals to operate. There is no guarantee that technological advances
will not render systems based on ultra-wideband radio obsolete.
Staying abreast of technological changes may require substantial investment. The Group’s existingreference designs may become obsolete or may be superseded by new technologies or changes in customer
requirements. The technology used in the Group’s products is still evolving and is highly complex andmay change rapidly. Research and development by other companies may render any of the Group’s
products in development or currently available obsolete.
Intellectual property protection
The Group has a number of trade marks registered, and is pursuing registration of a number of marks, inthe major territories in which it operates. The Group also has a patent portfolio comprising a number ofpatents filed in territories worldwide. Should a third party successfully demonstrate priority over any ofthese rights, it could inhibit the Group, or the Group’s customers, from selling products in certain territories.
Any failure to protect the Group’s intellectual property may result in another party copying or otherwise
obtaining and using its proprietary technology without authorisation. There may not be adequate protection
for the intellectual property in every country in which the Group’s products are made available and policing
unauthorised use of proprietary information is difficult and expensive. Due to the Group’s size and limited
cash resources, it may not be able to detect and prevent infringement of its intellectual property.
In addition, some of the Group’s patents are licensed from a third party. The terms of that licence are on
relatively standard commercial terms. However, there can be no guarantee that such third party will
adequately maintain such patents and therefore the protection and benefit afforded to the Company bysuch patents cannot be guaranteed.

27

AR Anx 1 –4
AR Anx3 – 1.2

The steps which the Group has taken to protect its intellectual property may be inadequate to prevent themisappropriation of its proprietary technology. Any misappropriation of the Group’s intellectual property
could have a negative impact on the Group’s business and its operating results. Furthermore, the Groupmay need to take legal action to enforce its intellectual property, to protect trade secrets or to determine
the validity or scope of the proprietary rights of others. Litigation relating to the Group’s intellectual
property, whether instigated by the Group to protect its rights or arising out of alleged infringement of
third party rights, may result in substantial costs and the diversion of resources and management attention
and there can be no guarantees as to the outcome of any such litigation.
Reliance on third parties, including manufacturers
The Group relies on third party equipment manufacturers in the completion of its products, and therefore
does not always have complete control over the equipment and materials it requires to comply with its
obligations under customer contracts. To the extent that the Group cannot acquire equipment or materials
according to its plans and budgets, its ability to complete its work for its customers within the timetable
laid down by the contract or at a profit may be impaired. If a manufacturer is unable to deliver the products
for any reason, the Group may be required to purchase such equipment or materials from another source
at a higher price. The resulting additional costs may be substantial and the Group may be in breach of its
contracts with customers, which may result in a financial loss on a particular contract or a loss of business.
In addition, any resulting failure to fulfill contracts with customers and other business partners may havean adverse effect on the Group’s future profitability and reputation.
AsteelFlash (Bedford) Limited (formerly MRP Electronics plc) supplies more than 75 per cent. of the
RTLS components required annually by the Group. If AsteelFlash (Bedford) Limited were to halt
production for any reason (including, but not limited to, as a result of any failure in the supply of materials
and components to AsteelFlash (Bedford) Limited) and the Group was unable to source an alternative
suitable supplier, the Group would not be able to fulfil those contracts dependant on the goods and/or
services supplied by AsteelFlash (Bedford) Limited. The Directors keep this situation under regularreview and will, as appropriate, take appropriate steps to mitigate this risk.
Dependence on key executives and personnel
The Group’s development and prospects are dependent upon the continued services and performance of
its Directors, senior management and other key personnel. In addition, from time to time the services of
the Group’s geospatial consultants are supplemented by the hire of external consultants. The loss of theservices of any of the Directors, senior management or key personnel or a substantial number of talented
employees or key consultants, could cause disruption or the loss of experience, skills or customer
relationships of such personnel, which could have a material adverse effect on the Group’s business,financial condition and results of operations.
Ability to recruit and retain skilled personnel
The Group believes that it has the appropriate incentivisation structures to attract and retain the calibreof employees necessary to ensure the efficient management and development of the Group. However,any difficulties encountered in hiring appropriate employees and the failure to do so may have a
detrimental effect upon the trading performance of the Group. The ability to attract new employees withthe appropriate expertise and skills cannot be guaranteed.
Reliance on key systems
The Group’s business relies on various key systems, including software. If the Group’s access to or useof these systems was restricted or terminated the Group would have to incur expense sourcing suitablereplacement and/or alternative systems, and time in relation to staff training, which could have an adverse
effect on the Group’s business, operation and financial position.

28

Growth management and acquisitions
The Directors believe that further expansion, either organic or via acquisition, will be required in the
future to capitalise on the anticipated increase in demand for the Group’s systems. The Group’s future
success will depend, in part, on its ability to manage this anticipated expansion. Such expansion is
expected to place demands on management, support functions, accounting, sales and marketing and otherresources. If the Group is unable to manage its expansion effectively, its business and financial results
could suffer.
Potential requirement for further investment
Any future expansion, activity and/or business development may require additional capital, whether
from equity or debt sources. There can be no guarantee that the necessary funds will be available ona timely basis, on favourable terms, or at all, or that such funds if raised, would be sufficient. If
additional funds are raised by issuing equity securities, dilution to the then existing shareholdings
may result. Debt funding may require assets of the Group to be secured in favour of the lender, which
security may be exercised if the Group were to be unable to comply with the terms of the relevant
debt facility agreement. The level and timing of future expenditure will depend on a number of factors,
many of which are outside the Group’s control. If the Group is not able to obtain additional capitalon acceptable terms, or at all, it may be forced to curtail or abandon such planned expansion, activity
and/or business development.
Market risks
The Group faces competitive and strategic risks that are inherent in a rapidly growing emerging market.
The Group’s products are complex and may contain undetected defects when first introduced andproblems may be discovered from time to time in existing, new or enhanced products. Undetected defects
could increase the Group’s costs or reduce revenues.
The Group’s success will depend on market acceptance of the Group’s products and there can be no
guarantee that this acceptance will be forthcoming. Market opportunities targeted by the Group maychange and this could lead to an adverse effect upon its revenue and earnings.
Dependence on key contracts
The success of the Group will depend to a large extent on the performance of its current and futurecontracts. In addition, the Group is dependent on a number of key contracts and customer relationships
for its current and future growth and development. In the financial year to 31 December 2010 theGroup’s ten largest customers accounted for 64.8 per cent. of the Group’s revenue. There can be noassurance that these customer relationships will continue or that the revenue that the Directors expect
to generate from these relationships will materialise. Similarly, there is no guarantee that any of thecontracts the Directors anticipate signing with customers or suppliers will be entered into despite initial
indications from these entities that this will be the case and that if contracts are entered into with any
such potential customers and/or suppliers that they will generate significant revenue. The Group’s
operating plan and future results could be hindered if this were to be the case and replacement
customers and suppliers of equal ability could not be found at the same cost or on the same terms.
Competition
The Group competes with other companies. Current and potential competitors may have substantiallygreater financial, technical and marketing resources, longer operating histories, larger customer bases,
greater name recognition and more established relationships than the Group and so may be better able tocompete in the Group’s target markets.
Trade restrictions
The Group enters into a number of contracts which can contain onerous terms, for example, significant
warranty and indemnity provisions, restrictive covenants and “most favourable treatment” clauses. The
Board takes all reasonable steps to ensure that such terms are within the Group’s commercial parameters
and that the contracts that are entered into advance the Group’s financial and/or commercial position.
However, these provisions can, in certain circumstances, be unduly burdensome or restrict the availability29

of commercial and business opportunities that may otherwise have been available to the Group. Suchterms may not always be legally enforceable. However, due to the Group’s relative negotiating position,
the Group has, to date, decided not to seek to resist the impact of such terms.
Reputation
The Group’s reputation is central to its future success, in terms of the services and products it provides,
the way in which it conducts its business and the financial results which it achieves. Failure to meet the
expectations of its clients, suppliers, employees, shareholders and other business partners may have amaterial adverse effect on the Group’s reputation and future revenue.
Profits
For the year ended 31 December 2010 the Group made a net profit of £398,000. Although the
Directors are confident about the prospects of the Group to continue to make a profit, there can be
no certainty that the Group will make one in the short or medium term or at all. Any such profits arelikely to be retained and used towards the development of the Group’s activities and business for theforeseeable future. Your attention is also drawn to the risk factor immediately below regarding theGroup’s dividend policy.
Dividends
The Company’s current policy is not to pay dividends. There can be no assurance as to the level of future
dividends (if any) that may be paid by the Company. Any determination to pay dividends in the future
will be a decision for the Board (and, except in the case of an interim dividend, will be subject toShareholder approval) and may depend upon the Group’s contractual restrictions, restrictions imposedby applicable law and generally accepted accounting principles from time to time, and other factors theBoard deems relevant.
The payment of dividends by the Company is subject to its having sufficient distributable reserves andcash for such purpose, each of which will depend on the underlying profitability of the Group.
Directors
The Directors have and may have in the future additional professional responsibilities and as such, may
experience conflicts of interest and demands on their time to the possible detriment of the Group.
The Group’s objectives may not be fulfilled
Although the Group has a clearly defined future strategy there can be no guarantee that its objectives
will be achieved. The failure of the Group to fulfil its strategy as currently anticipated (whether in whole
or in part) may have an adverse effect on future Group revenue.
The Company has discretion as to the use of the net proceeds receivable by the Company from thePlacing and may not use these funds in a manner Shareholders would prefer
The Company’s management will have broad discretion in how it applies the net proceeds receivableby the Company from the Placing. In addition, the Company is unable to determine how much of the
net proceeds will be used for any identified purpose because circumstances regarding its planned useof the proceeds may change, although the Directors currently have no intention of deploying the funds
towards any purpose other than those referred to in Part 1. Investors will not have the opportunity toevaluate the economic, financial or other information on which the Company bases its decisions on
how to use the net proceeds. The failure of the Company’s management to apply these funds
effectively could harm investor confidence and cause the price of the Ordinary Shares to decline.
Transfer pricing
There is a risk that amounts paid or received under intra-group arrangements in the past and/or the
future could be deemed for tax purposes to be lower or higher, as the case may be, or be disregarded forthe purposes of calculating tax which may increase the Group’s taxable income or decrease the amountof relief available to the Group with a consequential negative effect on its financial and operating results.

30

Venture Capital Trust status
The Company has received from HM Revenue & Customs provisional approval that the Company should
be a “qualifying holding” for the purposes of the VCT legislation under Part 6 Chapter 4 of the Income
Taxes Act 2007, and that the Ordinary Shares will be eligible shares for the purposes of section 285(3)Income Taxes Act 2007.
The provisional approval relates only to the qualifying status of the Company and its shares and does notguarantee that any particular VCT will qualify for relief in respect of an acquisition of Ordinary Shares.
The conditions for relief are complex and depend not only upon the qualifying status of the Company,
but upon certain factors and characteristics of the VCT concerned.
The status of the Ordinary Shares as a “qualifying holding” for VCT purposes will be conditional,
inter alia, upon the Company and the VCT continuing to satisfy the relevant requirements, including theuse of VCT funds for UK trading activities and acquisitions only.
Neither the Company nor the Company’s advisers are giving any warranties or undertakings that VCTqualifying status will be available in respect of this Placing, or that in due course such relief or statuswill not be withdrawn.
Circumstances may arise where the Board believes that the interests of the Company are not best servedby acting in a way that preserves the VCT qualifying status (if granted). In such circumstances, theCompany cannot undertake to conduct its activities in a way designed to preserve any such relief or status.
Should the law regarding VCTs change then any relief or qualifying status previously obtained may
be lost.
Where provisional approval is given by HM Revenue & Customs, the qualifying holding status of theCompany under the VCT legislation could be prejudiced if the Company ceases to carry on the businessoutlined in this document at any time whilst held as a qualifying holding by VCTs.
Any person who is in any doubt as to their taxation position should consult their professional taxation adviser.
Risk of overseas tax liabilities
There is a risk that the Group may be subject to historic and ongoing tax liabilities arising from theactivities of the Group in certain jurisdictions. While the Directors believe the nature and extent of any
such potential liabilities to be small, in the absence of any further investigation or review by the Group,
the risk remains unquantifiable.
Operating Losses
The Group has had, and expects to continue to have in the future, the benefit of tax losses carried forwardfrom prior years. Tax legislation governing the usability of losses carried forward in the jurisdictions inwhich the Group operates is complex and includes, amongst other things, the possibility that the use oflosses may be restricted whenever changes in ownership occur or changes in the nature of the businessoccur. As the Company (being the ultimate holding company of the companies in the Group that arecarrying the tax losses) may have undergone a change in ownership as a result of its various fundraising
activities, there is a possibility that some or all of the tax losses utilised or to be utilised by companies in
the Group may be subject to challenge and may be found to be restricted. If such a challenge were tomaterialise, there is a potential risk of a material tax exposure to the Group. However, the Directors
believe the likelihood of such risk materialising to be small and that, in any event, they believe the Group
has sufficient financial resources to fund such a tax liability if it were to become payable.
General risks
Economic conditions and current economic weakness
Any economic downturn either globally or locally in any area in which the Group operates may havean adverse effect on the demand for the Group’s products. A more prolonged economic downturn may
lead to an overall decline in the volume of the Group’s sales, restricting the Group’s ability to realisea profit.
31

In particular, it should be noted that a large number of the Group’s major clients operate in theautomotive industry. A downturn in the demand for new vehicles may result in a fluctuation of thedemand for the Group’s products in this field which would, in turn, restrict the Group’s ability to makea profit.
Taxation
Statements in this document in relation to tax and concerning the taxation of investors in Ordinary Sharesare based on current tax law and practice which is subject to change.
The taxation of an investment in the Company depends on the specific circumstances of the relevant investor.
Changes in tax laws or their interpretation could affect the Group’s financial condition or prospects
The nature and amount of tax which members of the Group expect to pay and the reliefs expected to
be available to any member of the Group are each dependent upon a number of assumptions, any oneof which may change and which would, if so changed, affect the nature and amount of tax payable
and reliefs available. In particular, the nature and amount of tax payable is dependent on theavailability of relief under tax treaties in a number of jurisdictions and is subject to changes to the
tax laws or practice in any of the jurisdictions affecting the Group. Any limitation in the availabilityof relief under these treaties, any change in the terms of any such treaty or any changes in tax law,interpretation or practice could increase the amount of tax payable by the Group. For example, theGroup currently benefits from enhanced deductions on its UK research and development activities
for UK corporation tax purposes, which are of significant benefit to the taxation position of theGroup. Should this tax relief be amended or removed in future years then this would have an effecton the amount of tax payable by the Group.
AIM
AIM securities are not admitted to the Official List. An investment in shares quoted on AIM may carry ahigher risk than an investment in shares quoted on the Official List. AIM has been in existence since June
1995 but its future success and liquidity in the market for the Company’s securities cannot be guaranteed.
AIM is a market designed primarily for emerging or smaller companies to which a higher investment
risk tends to be attached rather than for larger or more established companies. A prospective investor
should be aware of the risks of investing in such companies and should make the decision to invest only
after careful consideration and, if appropriate, consultation with an independent financial adviser
authorised under FSMA who specialises in advising on the acquisition of shares and other securities.
Investment risk
An investment in a share which is traded on AIM, such as the Ordinary Shares, may be difficult to realise
and carries a high degree of risk. The ability of an investor to sell Ordinary Shares will depend on there
being a willing buyer for them at an acceptable price. Consequently, it might be difficult for an investor
to realise his/her investment in the Company and he/she may lose all of his/her investment.
Investors should be aware that, following Admission, the market price of the Ordinary Shares may
be volatile and may go down as well as up and investors may therefore be unable to recover their
original investment and could even lose their entire investment. This volatility could be attributableto various facts and events, including the availability of information for determining the market valueof an investment in the Company, any regulatory or economic changes affecting the Group’s
operations, variations in the Group’s operating results, developments in the Group’s business or its
competitors, or changes in market sentiment towards the Ordinary Shares. In addition, the Group’s
operating results and prospects from time to time may be below the expectations of market analysts
and investors.
Market conditions may affect the Ordinary Shares regardless of the Group’s operating performanceor the overall performance of the sector in which the Group operates. Share market conditions areaffected by many factors, including general economic outlook, movements in or outlook on interest
rates and inflation rates, currency fluctuations, commodity prices, changes in investor sentimenttowards particular market sectors and the demand and supply for capital. Accordingly, the market
price of the Ordinary Shares may not reflect the underlying value of the Group’s net assets, and the32price at which investors may dispose of their Ordinary Shares at any point in time may be influenced
by a number of factors, only some of which may pertain to the Group while others of which may beoutside the Group’s control.
If the Company’s revenues do not grow, or grow more slowly than anticipated, or if its operating or capital
expenditures exceed expectations and cannot be adjusted sufficiently, the market price of its Ordinary Shares
may decline. In addition, if the market for securities of companies in the same sector or the stock market ingeneral experiences a loss in investor confidence or otherwise falls, the market price of the Ordinary Shares
may fall for reasons unrelated to the Group’s business, results of operations or financial condition. Therefore,
investors might be unable to resell their Ordinary Shares at or above the Placing Price.
Illiquidity
There will have been no public trading market for the Ordinary Shares prior to Admission. The Ordinary
Shares may therefore be illiquid in the short to medium term and, accordingly, an investor may find it
difficult to sell Ordinary Shares, either at all or at an acceptable price. Further, the Group can give noassurance that an active trading market for the Ordinary Shares will develop, or if such a market develops,
that it will be sustained. If an active trading market does not develop or is not maintained, the liquidity
and trading price of the Ordinary Shares could be adversely affected and investors may have difficulty
selling their Ordinary Shares. The market price of the Ordinary Shares may drop below the Placing Price.
Any investment in the Ordinary Shares should be viewed as a long term investment.
Exchange rate risk
Exchange rate fluctuations could have a material adverse effect on the Group’s profitability or the pricecompetitiveness of its products and services. There can be no guarantee that the Group would be able tocompensate or hedge against such adverse effects and therefore negative exchange rate effects could havea material adverse effect on the Group’s business and prospects, and its financial performance.
Litigation risks
Whilst the Group has taken, and the Company intends the Group to continue to take, such precautions
as it regards appropriate to avoid or minimise the likelihood of any legal proceedings or claims, or any
resulting financial loss to the Group, the Directors cannot preclude the possibility of litigation beingbrought against the Group.
There can be no assurance that claimants in any litigation proceedings will not be able to devote
substantially greater financial resources to any litigation proceedings or that the Group will prevail in
any such litigation. Any litigation, whether or not determined in the Group’s favour or settled by theGroup, may be costly and may divert the efforts and attention of the Group’s management and otherpersonnel from normal business operations.

33

PART 3
FINANCIAL INFORMATIONPART AACCOUNTANT’S REPORT ON THE HISTORICAL FINANCIAL INFORMATION
OF THE GROUP
Ubisense Group plc
St. Andrew’s House
St. Andrew’s Road
Chesterton
Cambridge
CB4 1DL

Grant Thornton UK LLP
Byron House
Cambridge Business Park
Cambridge CB4 0WZ
T +44 (0)1223 225600
F +44 (0)1223 225619
www.grant-thornton.co.uk

16 June 2011
Dear Sirs
Ubisense Group plc
We report on the financial information set out in Part B of Part 3 of the AIM Admission Document. Thisfinancial information has been prepared for inclusion in the AIM Admission Document dated 17 June
2011 of Ubisense Group plc on the basis of the accounting policies set out in note 3 of the financial
information and covers the three years ended 31 December 2008, 2009 and 2010.
This report is required by Paragraph (a) of Schedule Two of the AIM Rules for Companies and is given
for the purpose of complying with that regulation and for no other purpose.
Responsibilities
Save for any responsibility arising under Paragraph (a) of Schedule Two of the AIM Rules for Companies
to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume
any responsibility and will not accept any liability to any other person for any loss suffered by any suchother person as a result of, arising out of, or in connection with this report or our statement, required by
and given solely for the purposes of complying with Paragraph (a) of Schedule Two of the AIM Rules
for Companies, consenting to its inclusion in the AIM Admission Document.
The Directors of Ubisense Group plc are responsible for preparing the financial information on the basisof preparation set out in note 2 to the financial information and in accordance with International Financial
Reporting Standards as adopted by the European Union.
It is our responsibility to form an opinion on the financial information, and to report our opinion to you.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to theamounts and disclosures in the financial information. It also included an assessment of the significant
estimates and judgements made by those responsible for the preparation of the financial information andwhether the accounting policies are appropriate to the entity’s circumstances, consistently applied andadequately disclosed.

34

We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance thatthe financial information is free from material misstatement, whether caused by fraud or other irregularity
or error.
OpinionIn our opinion, the financial information gives, for the purposes of the AIM Admission Document dated
17 June 2011, a true and fair view of the state of affairs of Ubisense Group plc as at the dates stated andof its results, other gains and losses, cash flows and changes in equity for the periods then ended inaccordance with the basis of preparation set out in note 2 and in accordance with the applicable reporting
framework as described in note 2 and has been prepared in a form that is consistent with the accounting
policies adopted in Ubisense Group plc’s latest annual accounts.
Declaration
For the purposes of Paragraph (a) of Schedule Two of the AIM Rules for Companies we are responsible
for this report as part of the AIM admission document and declare that we have taken all reasonable careto ensure that the information contained in this report is, to the best of our knowledge, in accordancewith the facts and contains no omission likely to affect its import. This declaration is included in the AIM
admission document in compliance with Schedule Two of the AIM Rules for Companies.

Yours faithfully

GRANT THORNTON UK LLP

35

PART BHISTORICAL FINANCIAL INFORMATION OF THE GROUP

The financial information set out below of the Company and its subsidiary undertakings for the three
years ended 31 December 2010 has been prepared by the Directors of the Company on the basis set
out in note 2.
Ubisense Trading Limited was re-registered as Ubisense Group plc on 31 May 2011.
The accompanying notes represent an integral part of the financial information.
The financial information contained within this section does not constitute statutory accounts within
the meaning of section 434 of the Act.
Consolidated Income Statement
Notes

31/12/08£’000

31/12/09£’000

31/12/10
£’000

5

9,693
(6,323)

14,985(9,658)

17,697(11,762)

Gross Profit
Administrative expenses

3,370(4,090)5,327(4,397)

5,935(5,308)Operating Profit/(Loss)
Finance income
Finance costs

20
20

(720)
12
(275)

930
16
(230)

627
5
(237)

Profit/(Loss) before tax
Income tax

6
21

(983)
117

716
157

395
3

(866)

873

398

31/12/08£’000

31/12/09£’000

31/12/10
£’000

(866)

873

398

(152)

48

(29)

(1,018)921

369

Revenue
Cost of Sales

Profit/(Loss) for the year attributable tothe owners of the parent
All operations are continuing operations.
Consolidated Statement of Comprehensive Income

Profit/(loss) for the year
Other comprehensive income
Foreign exchange on consolidation
Total comprehensive income for the year
attributable to the owners of the parent

36Consolidated Statement of Financial Position
Notes

2008
£’000

2009
£’000

2010
£’000

7
8
9

6,069
390
247

6,069
424
162

6,069
525
279

6,706

6,655

6,873

292
2,695
2,052

264
3,656
2,396

364
6,900
7,130

5,039

6,316

14,394

11,745

12,971

21,267

—
3,604

244
2,930

2,372
5,974

3,604

3,174

8,346

2,869
109

3,379
119

1,246
140

2,978

3,498

1,386

Total Liabilities

6,582

6,672

9,732

Net assets

5,163

6,299

11,535

235
9,773
357
455
(114)
(5,543)

235
9,773
499
528
(66)
(4,670)304
14,550502
546(95)(4,272)

5,163

6,299

11,535

Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

13
14
15

Total assets
Current liabilities
Loans and borrowings
Trade and other payables
Non-current liabilities
Loans and borrowings
Deferred tax

EquityEquity attributable to owners of the parent
company
Share capital
Share premium accountEquity reserve
Option reserve
Foreign exchange reserve
Retained earnings

11
19

11
12

16

Total equity37Consolidated Statement of Cash Flows
Notes

31/12/08£’000

31/12/09£’000

31/12/10
£’000

(983)
326
1,133
121

716
776
(1,607)
167

395
634
(335)
32

Cash flow from operating activities

597

52

726

Investing Activities
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received

(89)
(258)
12

(46)
(302)
16

(218)
(400)
5

Cash flow from investing activities

(335)

(332)

(613)

Financing activities
Proceeds from issue of borrowings
Repayment of borrowings
Interest paid
Proceeds from issue of share capital

1,108
(37)
(184)
—

780
—
(114)
—

150
(255)
(108)
4,846

Cash flow from financing activities

887

666

4,633

1,149

386

4,746

756
147

2,052
(42)

2,396
(12)

2,052

2,396

7,130

Operating activities
Profit before tax
Adjustments
Net changes in working capital
Taxes received

22
22

Net change in cash and cash equivalents fromcontinuing operations
Cash and cash equivalents at beginning of year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of year38Consolidated Statement of Changes In Equity
Share
capital
£’000

Share
premium
account£’000

EquityReserve£’000

OptionReserve£’000

Foreign
Exchange
Reserve£’000

Profitand lossaccount
£’000

Total
Equity£’000

At 1 January 2008
Increase in Option Reserve
Equity Component of Loans

235
—
—

9,773
—
—

289
—
68

421
34
—

38
—
—

(4,677)
—
—

6,079
34
68

Transactions with owners
Loss for the year
Foreign Exchange on consolidation

—
—
—

—
—
—

68
—
—

34
—
—

—
—
(152)

—
(866)
—

102
(866)
(152)

Total comprehensive income forthe year

—

—

—

—

(152)

(866)

(1,018)At 31 December 2008
Increase in Option Reserve
Equity Component of Loans

235
—
—

9,773
—
—

357
—
142

455
73
—

(114)
—
—

(5,543)
—
—

5,163
73
142

Transactions with owners
Profit for the year
Foreign Exchange on consolidation

—
—
—

—
—
—

142
—
—

73
—
—

—
—
48

—
873
—

215
873
48

Total comprehensive income forthe year

—

—

—

—

48

873

921

At 31 December 2009
Increase in Option Reserve
Equity Component of Loans
Issue of share capital
Net premium on new share capitalsubscribed

235
—
—
69

9,773
—
—
—

499
—
3
—

528
18
—
—

(66)
—
—
—

(4,670)
—
—
—

6,299
18
3
69

—

4,777

—

—

—

—

4,777

Transactions with owners
Profit for the year
Foreign Exchange on consolidation

69
—
—

4,777
—
—

3
—
—

18
—
—

—
—
(29)

—
398
—

4,867
398
(29)

Total comprehensive income forthe year

—

—

—

—

(29)

398

369

At 31 December 2010

304

14,550

502

546

(95)

(4,272)

11,53539

Notes to the Historical Financial Information
1.
Corporate Information
Ubisense Trading Ltd is a limited company incorporated in the United Kingdom. The address of theregistered office is St. Andrew’s House, St. Andrew’s Road, Chesterton, Cambridge, CB4 1DL.
2.
Basis of Preparation and Statement of Compliance
The historical financial information comprises the financial statements of Ubisense Trading Ltd and its
subsidiaries (together referred to as the ‘Group’) as at 31 December for each of the three years 2008,2009 and 2010 and is prepared under the historic cost convention.
The historical financial information has been prepared in accordance with the International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
The accounting policies which follow set out the policies applied in preparing the historical financial
information.
The historical financial information is presented in pounds sterling which is also the functional currencyof the ultimate parent company. All values are rounded to the nearest thousand (£’000) except whereotherwise indicated. Every entity within the group has its own functional currency. Foreign operations
are included in accordance with the policies set out in note 3(q).
3.
a)

Principal Accounting Policies
Basis of Consolidation and Business Combinations
Basis of Consolidation
The consolidated financial statements incorporate those of the Company and all entities controlled
by it, after eliminating internal transactions. Control is achieved where the Group has the power tocontrol the financial and operating policies through its share ownership. Subsidiaries areconsolidated from the date on which control is obtained by the Group and cease to be consolidated
from the date on which control is transferred out of the group. The entities results are adjusted,
where appropriate, to conform to group accounting policies.
Business Combinations
Business combinations are accounted for using the acquisition method under the revised IFRS 3
Business Combinations (IFRS 3R). The consideration transferred by the Group to obtain control
of a subsidiary is calculated as the sum of the acquisition-date fair value of assets transferred,
liabilities incurred and the equity interests issued by the Group, which includes the fair value of
any asset or liability arising from a contingent consideration agreement. Acquisition costs are
expensed as incurred. There have not been any business combinations since the date of transition.
The Group recognises identifiable assets acquired and liabilities assumed, including contingent
liabilities, in a business combination regardless of whether they have been previously recognisedin the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed
are generally measured at their acquisition-date fair values.
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as theexcess of the sum of a) fair value of consideration transferred, b) the recognised amount of any
non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity
interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fairvalues of identifiable net assets exceed the sum calculated above, the excess amount (ie gain on abargain purchase) is recognised in profit or loss immediately.
The Group has elected to not restate business combinations that occurred before the date oftransition to IFRS. The carrying amount of goodwill has not been adjusted for intangible assets
subsumed within goodwill or for intangible assets that do not qualify for recognition under IFRS.
The amount of goodwill at the date of transition relates to the Ubisense AG, Ubisense Inc and40

Ubisense Ltd RTLS and Geospatial cash generating units. At the date of transition, this goodwill
was tested for impairment based on cash flow forecasts made at that date. An impairment of£161,000 relating to the goodwill which arose on the acquisition of Terraprise Inc was identified.
b)Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised
impairment loss. Depreciation is charged to the income statement so as to write off the cost or
valuation less estimated residual values over their expected useful lives on a straight-line basis overthe following periods:
Fixtures & Fittings
Computer equipment
Demonstration Equipment

5 to 8 years, or period of the lease if shorter3 years
1 yearResidual values and useful economic lives are assessed annually. The gain or loss on the disposal
or retirement of an asset is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in administrative expenses.
c)Goodwill
Goodwill represents the future economic benefits arising from a business combination that are notindividually identified and separately recognised. See note 3(a) for information on how goodwill
is initially determined. Goodwill is carried at cost less accumulated impairment losses. See below
and refer to note 7 for a description of impairment testing procedures.
Impairment testing of goodwill, other intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are largely independent cash flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating unit level. Goodwill isallocated to those cash-generating units that are expected to benefit from synergies of the related
business combination and represent the lowest level within the Group at which managementmonitors goodwill.
Cash-generating units to which goodwill has been allocated are tested for impairment at least
annually. All other individual assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount.
To determine the value-in-use, management estimates expected future cash flows from eachcash-generating unit and determines a suitable interest rate in order to calculate the present valueof those cash flows. The data used for impairment testing procedures are directly linked to theGroup’s latest approved budget, adjusted as necessary to exclude the effects of future
reorganisations and asset enhancements. Discount factors are determined individually for eachcash-generating unit and reflect their respective risk profiles as assessed by management.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill
allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to theother assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously recognised may no longer exist. An
impairment charge is reversed if the cash-generating unit’s recoverable amount exceeds its
carrying amount.
Any impairment losses are recognised through the income statement.

d)Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from the Group’s development activities isrecognised only if all of the following conditions are met:•

Completion of the intangible asset is technically feasible so that it will be available for use
or sale.
41

•The Group intends to complete the intangible asset and use or sell it.

•

The Group has the ability to use or sell the intangible asset.

•

The intangible asset will generate probable future economic benefits. Among other things,
this requires that there is a market for the output from the intangible asset or for the intangible
asset itself, or, if it to be used internally, the asset will be used in generating such benefits.

•

There are adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset.

•

The expenditure attributable to the intangible asset during its development can bemeasured reliably.

Internally-generated intangible assets, consisting of direct labour costs, are amortised on astraight-line basis over their useful economic lives on completion of the asset. Amortisation isshown within administrative expenses in the income statement. The estimated useful lives of current
development projects are three years. Upon completion the assets are subject to impairment testing.
Where no internally-generated intangible asset can be recognised, development expenditure isrecognised as an expense in the period in which it is incurred.
e)Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the cost ofpurchase on a first in, first out basis. Net realisable value is based on estimated selling price lessadditional cost to completion and disposal. Provision is made for obsolete, slow moving or defective
items where appropriate and are recognised as an expense in the period in which the write-downor loss occurs.

f)Financial assets
Financial assets comprise trade receivables, other receivables and cash and cash equivalents.
Trade and other receivables are recognised initially at fair value and measured subsequent to initialrecognition at amortised cost using the effective interest method, less provision for impairment.
Any change in their value through impairment or reversal of impairment is recognised in theincome statement.
Provision against trade receivables is made when there is objective evidence that the Group will
not be able to collect all amounts due to it in accordance with the original terms of those receivables.
The amount of the write-down is determined as the difference between the asset’s carrying amountand the present value of estimated future cash flows.

g)

Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and bank deposits available on demand.

h)Financial liabilities
The Group’s financial liabilities include trade payables, other payables and borrowings (i.e. thedebt part of the compound instrument).
Financial liabilities are initially measured at fair value, and are subsequently measured at amortisedcost, using the effective interest rate method.

i)

Financial instruments
Financial liabilities and equity instruments are classified according to the substance of thecontractual arrangements entered into. An equity instrument is any contract that evidences a residualinterest in the assets of the Group after deducting all of its financial liabilities. Equity instruments
do not include a contractual obligation to deliver cash or other financial assets to another entity.
Any instrument that does have the obligation to deliver cash or another financial asset to anotherentity is classified as a financial liability. Financial liabilities are presented under liabilities on thestatement of financial position. The accounting policies adopted for specific financial liabilities
and equity instruments are set out in (h) above.
42

j)Compound instruments
The Group has applied the requirements of IAS32 “Financial Instruments” to account for theConvertible and Bank Loans. These loans are regarded as compound instruments, consisting of aliability component and an equity component. At the date of issue, the fair value of the liability
component is estimated using the prevailing market interest rate for a similar debt instrument
without a conversion feature. The difference between the loan balance and the fair value assigned
to the liability component, representing the embedded equity element (option to convert theliability into equity of the group, or warrants over shares in the Company), is accounted for as anequity instrument.
The interest expense on the liability component is calculated by applying the prevailing market
interest rate for similar debt instrument to the liability component. The difference between thisamount and the interest paid is added to the carrying amount of the loan.
On conversion of debt to equity the carrying value of the debt instrument is transferred to equity
and no gain or loss arises on conversion.

k)

Taxation
Income tax expense comprises the current and deferred tax. Income tax is recognised in theincome statement.
Current income tax liabilities comprise those obligations to fiscal authorities relating to the current
or prior reporting period, that are unpaid at the statement of financial position date. They arecalculated according to the tax rates and tax laws applicable to the fiscal periods to which they
relate, based on the taxable profit for the year. All changes to current tax assets or liabilities arerecognised as a component of tax expense in the income statement, except where it relates to items
charged or credited directly to other comprehensive income or equity.
Deferred income taxes are calculated using the liability method on temporary differences. This
involves the comparison of the carrying amounts of assets and liabilities in the consolidated
financial statements with their respective tax bases. In addition, tax losses available to be carriedforward as well as other income tax credits to the Group are assessed for recognition as deferred
tax assets. However, deferred tax is not provided on the initial recognition of goodwill, nor on theinitial recognition of an asset or liability, unless the related transaction is a business combination
or affects tax or accounting profit.
Deferred tax liabilities are always provided in full. Deferred tax assets are recognised to the extent
that it is probable that the underlying deductible temporary differences will be able to be offset
against future taxable income. Deferred tax assets and liabilities are calculated, without discounting,at tax rates that are expected to apply to their respective period of realisation, provided they areenacted or substantively enacted at the reporting date.
Deferred tax is recognised as a component of tax expense in the income statement, except where
it relates to items charged or credited directly to other comprehensive income or equity.

l)

Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership
remain with the lessor are charged to the income statement net of any incentives received from thelessor on a straight-line basis over the period of the lease, even if the payments are not made onsuch a basis.

m)

Revenue recognition
Revenue represents amounts derived from the provision of goods and services which fall within
the Group’s ordinary activities, exclusive of value added tax and other similar sales taxes. Revenue
is measured by reference to the fair value of consideration received or receivable.
Revenues on product sales are recognised at the time that units are shipped, except for shipments
under arrangements involving significant acceptance requirements. Under such arrangements,
revenue is recognised when the Group has substantially met all its performance obligations.
43Revenue earned from sales under licence agreements is recognised when the software is madeavailable. When the sale includes a period of support and maintenance, a proportion of the revenue
is deferred and recognised ratably over the period of support. For licence rental fees amounts arerecognised over the period of the contract, commencing from when the software is available for use.
Training and services revenue, including expenses incurred in providing the training/ services, isrecognised in the period in which the relevant service is provided.
Where bundled sales, including a combination of some or all of the above are made, the revenue
attributable to the deal is apportioned across the constituents of the bundle, and then recognised
according to the policies stated above.
n)Long-term contracts
When revenue arises from customer specific contracts including customisation and modification,
the revenue is recognised as the contract progresses, based on stage of completion. Full provision
is made for losses on contracts in the period in which the loss is foreseen.

o)

Employee benefits
All accumulating employee-compensated absences that are unused at the statement of financial
position date are recognised as a liability.
Where the Group make contributions to personal defined contribution pension schemes of its
employees, contributions are charged as an expense in the period to which they relate.

p)

Share-based payment transactions
Ubisense Trading Limited issues equity settled share-based compensation to certain employees(including Directors). The fair value of employee services are determined by reference to the fairvalue of the instrument granted and expensed on a straight-line basis over the vesting period,
together with a corresponding increase in equity, based on the Group’s estimate of the shares thatwill eventually vest. These estimates are subsequently revised if there is any indication that the
number of options expected to vest differs from previous estimates. Any cumulative adjustment
prior to vesting is recognised in the current period. No adjustment is made to any expense
recognised in prior periods.
Fair value is measured by an external valuer using the Black-Scholes option pricing model. The
expected life used in the model has been adjusted, based on management’s best estimate, for theeffects of non-transferability, exercise restrictions and behavioural considerations.
Where the terms of an equity-settled transaction are modified, as a minimum, an expense isrecognised as if the terms had not been modified. In addition, an expense is recognised for any
increase in the fair value of the transaction as a result of the modification, as measured by the dateof modification.
Where an equity-settled transaction is cancelled, it is treated as if it had vested on the due date of
the cancellation, and any expense not yet recognised for the transaction is recognised immediately.
However if a new transaction is substituted for the cancelled transaction, and designated as areplacement transaction on the date that it is granted, the cancelled and new transactions are treatedas if they were a modification of the original transaction, as described in the previous paragraph.

q)

Foreign currencies
The assets and liabilities of foreign subsidiary companies are translated into sterling at the rates of
exchange ruling at the statement of financial position date. The results of foreign subsidiaries aretranslated into sterling (the functional currency of the Company) using the average exchange rate
where approximate to actual. Exchange differences arising on consolidation are reported in theForeign Exchange reserve and recognised in other comprehensive income.

44

Transactions denominated in a foreign currency are translated at the rate of exchange ruling at amonth end rate where approximate to actual rate for the relevant month. Monetary assets andliabilities denominated in foreign currencies are translated at the rate of exchange ruling at thestatement of financial position date.
Foreign exchange differences are charged to the income statement in the period in which they arise.
r)

Segment reporting
In identifying its operating segments, management generally follows the Group’s service lines,
which represents the main products and services provided by the Group and correspond to theanalysis of information reported to the Chief Operating Decision Maker.
Within its Real-Time Location Systems division (“RTLS”), the Group delivers mission-criticalenterprise asset tracking solutions utilising ultra-wideband (“UWB”) technology, to locate people
and assets in 3D, bringing visibility and control to industrial business processes.
Within its Geospatial division, the Group delivers core location based solutions, typically to blue
chip utility and communications companies, to allow them to better plan and maintain theirdispersed network of assets.
Each of these operating segments is managed separately as each deals with different technologies
and predominantly different customer bases.
There have been no changes from prior periods in the measurement methods used to determine
reported segment profit or loss.

s)

EquityEquity comprises:
Share capital – nominal value of ordinary shares are classified as equity.
Share premium – represents the excess over nominal value of the fair value of consideration
received for equity shares, net of expenses of the share issue.
Equity reserve – represents the attributed equity portion of the compound instruments.
Option reserve – represents equity settled share-based employee remuneration.
Foreign exchange reserve – represents the differences arising from the translation of investmentsin overseas subsidiaries.
Retained earnings – includes all current and prior period retained profits.

t)Standards and interpretations not yet applied by the GroupThe following standards and interpretations, which are yet to become mandatory, have not been
applied in the consolidated financial statements:•

IFRS 9 Financial Instruments (effective 1 January 2013)•

IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011)

Based on the Group’s current business model and accounting policies, management does not expect
material impacts on the consolidated financial statements when the Standards and Interpretations
become effective. The Group does not intend to apply any of these pronouncements early. Other
standards and interpretations are in issue, but not yet effective, in addition to those mentioned
above, which are not expected to have an impact on the group.

45

4.
Significant Accounting Estimates
The key assumptions concerning the future and other key sources of estimation uncertainty that have asignificant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below:a)Impairment of goodwill and other intangible assets
The Group determines whether goodwill is impaired at least on an annual basis. This requires anestimation of the value in use of the cash-generating units to which the goodwill is allocated.
Estimating the value in use requires the Group to make an estimate of the expected future cash
flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate
the present value of those cash flows. The carrying amount of goodwill at 31 December 2010 is£6,069,000. Further consideration of the impairment of goodwill is included in note 7.

b)

Research and development costs
Research costs are not capitalised. Development costs are capitalised from the point that it issufficiently certain that future economic benefits to the Group will cover all selling, administrationand support costs as well as the development costs themselves. The assessment of the criteria for
capitalisation is critically dependent on management’s judgement.

c)

Share options
Share options are granted on a discretionary basis and typically vest evenly over a three year period.
The fair value of options granted is determined using the Black-Scholes valuation model, which
requires a number of estimates and assumptions. The significant inputs into the model are shareprice at grant date, exercise price, expected option life, expected volatility and the risk free interest
rate. Volatility is measured as the standard deviation of expected share price returns based on a
statistical analysis of competitors’ share prices.

d)

Trade receivables
Trade receivables are stated net of provision for bad and doubtful debts, based on the Group’s best
estimate of the likelihood of recovery on a specific basis.

e)Deferred tax
A deferred tax asset is recognised where the Group considers it probable that future tax profits
will be available against which the tax credit will be utilised in the future. This specificallyapplies to tax losses and to outstanding vested share options at the statement of financial
position date. In estimating the amount of the deferred tax asset that should be recognised, thedirectors make judgements based on current budgets and forecasts, about the amount of futuretaxable profits and the timings of when these will be realised. No deferred tax asset iscurrently recognised.

f)

Revenue recognition
Significant management judgement is applied in determining the allocation and timing of therecognition of revenue on contracts. In this process management takes into account milestones,
hardware supplied, actual work performed and further obligations and costs expected to complete
the work.

5.
Segment Information
Management currently identifies the Group’s two divisions as operating segments as further describedin Note 3(r). These operating statements are monitored and strategic decisions are made on the basis ofadjusted segment operating results.
Centrally incurred costs, i.e. those which are not directly attributable to business segments, are reported
under ‘central’.

46

Segment information can be analysed as follows for the reporting periods under review:
RTLS
2008
£’000

Geospatial
2008
£’000

Central
2008
£’000

Total
2008
£’000

Product Revenue
Services Revenue

3,404
667

—
5,622

—
—

3,404
6,289

Total Revenue
Cost of Sales

4,071(2,319)5,622(4,004)——

9,693(6,323)Gross Profit
Administrative Expenses

1,752(3,334)

1,618
(186)

—
(570)

3,370
(4,090)Operating Profit
Finance income
Finance costs
Income tax expense(1,582)
—
—
—

1,432
—
—
—

(570)
12
(275)
117

(720)
12
(275)
117

(Loss)/Profit for the year
Fixed assets
Intangible assets
Goodwill
Stock
Debtors
Cash
Current liabilities
Non-current liabilities(1,582)
—
390
3,256
292
1,494
—
(1,592)
—

1,432
—
—
2,813
—
980
—
(1,135)
—

(716)
247
—
—
—
221
2,052
(877)
(2,978)

(866)
247
390
6,069
292
2,695
2,052
(3,604)(2,978)Net Assets

3,840

2,658

(1,335)5,163

In 2008 there were no customers whose revenue accounted for more than 10 per cent. of total revenue.

47

RTLS
2009
£’000

Geospatial
2009
£’000

Central
2009
£’000

Total
2009
£’000

Product Revenue
Services Revenue

3,984
1,205

—
9,796

—
—

3,984
11,001

Total Revenue
Cost of Sales

5,189(2,468)9,796(7,190)——14,985(9,658)Gross Profit
Administrative Expenses

2,721(3,194)

2,606
(208)

—
(995)

5,327
(4,397)

Operating Profit
Finance income
Finance costs
Income tax expense

(473)
—
—
—

2,398
—
—
—

(995)
16
(230)
157

930
16
(230)
157

(Loss)/Profit for the year
Fixed assets
Intangible assets
Goodwill
Stock
Debtors
Cash
Current liabilities
Non-current liabilities

(473)
—
424
3,256
264
1,953
—
(694)
—

2,398
—
—
2,813
—
1,515
—
(1,365)—(1,052)
162
—
—
—
188
2,396
(1,115)(3,498)

873
162
424
6,069
264
3,656
2,396
(3,174)(3,498)Net Assets

5,203

2,963

(1,867)

6,299

In 2009 there were two customers whose revenue accounted for more than 10 per cent. of total
revenue. They are both Geospatial customers based in Germany and together they total 30 per cent.
of the annual revenue.
RTLS
2010
£’000

Geospatial
2010
£’000

Central
2010
£’000

Total
2010
£’000

Product Revenue
Services Revenue

3,771
1,958

—
11,968——3,771
13,926

Total Revenue
Cost of Sales

5,729(2,520)11,968(9,242)——

17,697(11,762)

Gross Profit
Administrative Expenses

3,209(4,196)

2,726
(163)

—
(949)

5,935
(5,308)Operating Profit
Finance income
Finance costs
Income tax expense

(987)
—
—
—

2,563
—
—
—

(949)
5
(237)
3

627
5
(237)
3

(Loss)/Profit for the year
Property, plant and equipment
Intangible assets
Goodwill
Inventories
Trade and other receivables
Cash
Current liabilities
Non-current liabilities

(987)
—
518
3,256
364
2,010
—
(771)
—

2,563
—
—
2,813
—
4,563
—
(3,475)—(1,178)
279
7
—
—
327
7,130
(4,100)(1,386)

398
279
525
6,069
364
6,900
7,130
(8,346)(1,386)

Net Assets

5,377

3,901

2,257

11,53548

In 2010 there were two customers whose revenue accounted for more than 10 per cent. of total
revenue. They are both Geospatial customers based in Germany and together they total 34 per cent.
of the annual revenue.
The Group’s revenues from external customers are divided into the following geographical areas:

United Kingdom (country of domicile)
United States of America
Germany
Other

31/12/08£’000

31/12/09£’000

31/12/10
£’000

289
3,570
4,157
1,677

762
4,656
7,019
2,548

478
6,436
8,294
2,489

9,693

14,985

17,697

31/12/08£’000

31/12/09£’000

31/12/10
£’000

3,040
1,299
2,367

3,036
1,286
2,333

3,198
2,260
1,415

6,706

6,655

6,873

31/12/08£’000

31/12/09£’000

31/12/10
£’000

219
166
690
5
15
8
—
264
87
(681)

268
115
836
5
16
5
—
309
97
30

299
97
939
10
22
3
33
359
101
(80)

The Group’s non current assets excluding deferred tax, by location are:

UK
United States of America
Germany

6.
Profit/(Loss) before tax
This is stated after charging/(crediting):

Amortisation on intangibles (note 8)
Depreciation of owned property, plant and equipment:
Research and development costs expensed
Auditor remuneration – audit– audit of subsidiaries– tax services– other services
Operating leases – land and buildings
Operating leases – otherForeign Exchange loss/(gain)

Auditor remuneration for the parent and subsidiary undertakings is borne by Ubisense Limited.

49

7.

Goodwill

Net Book Value at 31 December

2008
£’000

2009
£’000

2010
£’000

6,069

6,069

6,069

For the purpose of annual impairment testing goodwill is allocated to the following cash-generating units.
2008
£’000

2009
£’000

2010
£’000

RTLS
Geospatial

3,256
2,813

3,256
2,813

3,256
2,813

Net Book Value at 31 December

6,069

6,069

6,069

At the date of transition to IFRS the amount of goodwill for the Group was tested for impairment
based on conditions at that date. The forecast at the transition date showed that the amount of goodwill
relating to the Ubisense Inc investment in Terraprise Inc should be impaired. An impairment of£161,000 was recognised.
The amount of goodwill for each cash generating unit noted above was tested for impairment at eachsubsequent reporting date based on conditions at that date. The forecasts at subsequent year end dates
showed that no impairment was necessary at these dates.
The recoverable amounts of the cash-generating units were determined based on value-in-use
calculations, covering a detailed two-year forecast, followed by extrapolation of expected cash flows
for the units’ remaining useful lives using the anticipated growth rate of 20 per cent. for RTLS and
10 per cent. for Geospatial.
RTLS
The forecast for the RTLS unit is for strong growth with key assumptions based on the current pipeline.
This unit is expected to continue to grow at above-average rates for the foreseeable future as a result ofsignificant investment in research and development. Cash flow projections show increasing profit margins
as a result of synergies. The estimate of recoverable amount for this unit is sensitive to changes in thegrowth rate.
Geospatial
Management’s key assumptions for the Geospatial units include steady growth and increasing profit
margins which have been determined by past experience in this market. The Group’s management believes
this is the best available input for forecasting this mature market. Cash flow projections reflect stableprofit margins consistent with historical performance.
Apart from the considerations described in determining the value-in-use of cash-generating units
described above, management is not currently aware of any other reasonable changes that would
necessitate changes in its key estimates.

50

8.
Other intangible assets
The Group’s other intangible assets comprise capitalised R&D and acquired software licences. The
carrying amounts for the reporting periods under review can be analysed as follows:
Capitalised R&D£’000

Software
£’000

Total
£’000

Cost
At 1 January 2008
Additions

527
258

—
—

527
258

At 31 December 2008
Additions

785
302

—
—

785
302

At 31 December 2009
Additions

1,087
389

—
11

1,087
400

At 31 December 2010

1,476

11

1,487

Amortisation
At 1 January 2008
Charge for the year

176
219

—
—

176
219

At 31 December 2008
Charge for the year

395
268

—
—

395
268

At 31 December 2009
Charge for the year

663
295

—
4

663
299

At 31 December 2010

958

4

962

Net Book Value at 31 December 2008

390

—

390

Net Book Value at 31 December 2009

424

—

424

Net Book Value at 31 December 2010

518

7

525

All amortisation charges (or reversals if any) are included within Administrative expenses.
9.

Property, plant and equipment
Fixtures &Fittings£’000

ComputerEquipment£’000

Demonstration
Equipment
£’000

Total
£’000

Cost
At 1 January 2008
Additions
Disposals
Foreign Exchange

338
41
(115)
53

600
58
(445)
99

22
7
—
—

960
106
(560)
152

At 31 December 2008
Additions
Disposals
Foreign Exchange

317
6
—
(14)

312
40
—
(18)

29
—
(29)
—

658
46
(29)
(32)

At 31 December 2009
Additions
Disposals
Foreign Exchange

309
18
(150)
(3)

334
200
(89)
(5)

—
—
—
—

643
218
(239)
(8)

At 31 December 2010

174

440

—

614

51

Fixtures &Fittings£’000

ComputerEquipment£’000

Demonstration
Equipment
£’000

Total
£’000

Depreciation
At 1 January 2008
Disposals
Charge for the year
Transfers in
Foreign Exchange

208
(106)
55
—
22

474
(442)
94
5
74

10
—
17
—
—

692
(548)
166
5
96

At 31 December 2008
Disposals
Charge for the year
Foreign Exchange

179
—
43
(4)

205
—
70
(12)

27
(29)
2
—

411
(29)
115
(16)

At 31 December 2009
Disposals
Charge for the year
Foreign Exchange

218
(150)
29
(2)

263
(88)
68
(3)

—
—
—
—

481
(238)
97
(5)

At 31 December 2010

95

240

—

335

Net Book Value at 31 December 2008

138

107

2

247

Net Book Value at 31 December 2009

91

71

—

162

Net Book Value at 31 December 2010

79

200

—

279

All depreciation charges (or reversals if any) are included within Administrative expenses.
10. Operating leases as lessee
At 31 December the Group’s future minimum operating lease payments were as follows:

Minimum lease payments due
within one year
Minimum lease payments due
within one to five years
Minimum lease payments due
after five years
Total

2008
£’000

Land & Buildings
2009
£’000

2010
£’000

2008
£’000

Other
2009
£’000

2010
£’000

262

270

307

73

74

92

511

205

148

59

49

96

—

—

—

—

—

—

773

475

455

132

123

188

Lease payments recognised as an expense during the period amount to £460,000 (2009: £406,000; 2008:£351,000).
The lease payments relate mainly to the rental contracts for the office buildings. The UK office has beenrented since September 2004 at St. Andrew’s House, St. Andrew’s Road, Chesterton, Cambridge,
CB4 1DL. The US office base has been rented since February 2005 at 5445 DTC Parkway, Greenwood
Village, Denver, CO 80111. The German office base has been rented since November 2005 at
ADAC Haus am Westfalendamm, Freie-Vogel Str. 393, 44269 Dortmund.
The Group’s operating lease agreements do not contain any contingent rent clauses. None of the operatinglease agreements contains renewal or purchase options or escalation clauses or any restrictions regarding
dividends, further leasing or additional debt.

52

11. Financial assets and liabilities
11.1 Categories of financial assets and liabilities
The carrying amounts presented in the Consolidated Statement of Financial Position relate to thefollowing categories of financial assets and liabilities:
Financial assets

2008
£’000

2009
£’000

2010
£’000

Loans and receivables
Trade and other receivables
Cash and cash equivalents

2,526
2,052

3,465
2,396

5,962
7,130

4,578

5,861

13,092Financial liabilities

2008
£’000

2009
£’000

2010
£’000

Financial liabilities measured at amortised costNon-current
Loans and borrowings

2,869

3,379

1,246

Current
Loans and borrowings
Trade and other payables

—
1,621

244
2,113

2,372
3,071

Total carrying amounts

1,621

2,357

5,443

Non-current

2008
£’000

2009
£’000

2010
£’000

Bank loan
Convertible Loan

984
1,885

746
2,633

492
754

2,869

3,379

1,246

2008
£’000

2009
£’000

2010
£’000

—
—

244
—

398
1,974

—

244

2,372

2008
£’000

2009
£’000

2010
£’000

984

990

890

—
238
746

244
330
416

398
492
—

984

990

890

11.2 Borrowings
Loans and borrowings comprise:

Current

Bank loan
Convertible Loan

Bank loan
The maturity of the above amounts is as follows:– Within one year
– Within one to two years– Within two to five years

On 22 February, 2008, the Group entered into a Loan Facility Agreement with HSBC plc for up to£2,000,000. The loan interest rate is 3 per cent. above the Bank Sterling Base Rate and the term is
5 years. The loan is secured by a debenture over the assets of the Group. It is repayable in monthly
instalments over three years commencing in April 2010.
As part of the Loan agreement HSBC plc have an entitlement to warrants, based on the amount of
the loan actually drawn down by the Group, giving them an entitlement to shares in the Company.
53

2008
£’000

2009
£’000

2010
£’000

Convertible Loan

1,885

2,633

2,728

The maturity of the above amounts is as follows:– Within one year
– Within one to two years– Within two to five years

—
—
1,885

—
1,878
755

1,974
754
—

Under the terms of the 2007 Convertible Loan, totalling £2,000,000, the loan holders receive
interest, paid quarterly, at 2 per cent. above the Bank of England base rate. Loan holders can request
the conversion of their loan into shares at any point up to 30 April 2011, at a rate of £0.90 per£0.02 Ordinary Share, or have their loan repaid on that date. In the event of an acquisition or Initial
Public Offering conversion or repayment will be required to take place prior to that event.
Under the terms of the 2008 Convertible Loan, totalling £887,000, the loan holders receive interest,
paid quarterly, at 2 per cent. above the Bank of England base rate. Loan holders can request theconversion of their loan into shares at any point up to 31 December 2012, at a rate of £0.90 per£0.02 Ordinary Share, or have their loan repaid on that date. In the event of an acquisition or Initial
Public Offering conversion or repayment will be required to take place prior to that event.
12. Deferred tax assets and liabilities
Deferred taxes arising from temporary differences can be summarised as follows:
2008
£’000

2009
£’000

2010
£’000

R&D Capitalisation
Balance b/fwd
Movement in year

105
4

109
10

119
21

Balance c/fwd

109

119

140

The above deferred tax liability has been recognised in the statement of financial position. The tablebelow summarises the deferred tax assets for the group which have not been recognised in the financial
statements as the tax losses and share option temporary differences are not anticipated to be able to be
used in the foreseeable future.

Non-current assets
LossesShare option temporary differences
Other temporary differences

2008
£’000

2009
£’000

2010
£’000

1,076
—
12

916
—
20

804
182
(1)

1,088

936

985

13. Inventories
Inventories recognised in the statement of financial position can be analysed as follows:

Finished goods

2008
£’000

2009
£’000

2010
£’000

292

264

364

There is no material difference between the replacement cost of inventory and the amounts stated above.
The amount of £1,080k is recognised as an expense (2009: £1,018k; 2008: £915k). Write downs of £nil,(2009: £49k; 2008: £16k) were recognised as an expense. Reversals of £9k, (2009: £nil; 2008: £nil) wererecognised as a credit to expenses.
5414. Trade and other receivables
Trade and other receivables recognised in the Consolidated Statement of Financial Position can beanalysed as follows:
2008
£’000

2009
£’000

2010
£’000

Trade receivables, grossAllowances for credit losses

2,493
(72)

3,066
(125)

5,469
(83)

Trade receivables, net
Other receivables

2,421
105

2,941
524

5,386
576

Financial assets

2,526

3,465

5,962

Prepayments and accrued income
VAT and taxation

116
53

144
47

816
122

Non-financial assets

169

191

938

2,695

3,656

6,900

Trade and other receivables

All amounts are short-term. The net carrying value of trade receivables is considered a reasonableapproximation of fair value.

Total
£’000

Neither past
due nor
impaired
£’000

2,421
2,941
5,386

1,317
1,317
3,030

1,008
927
2,113

96
697
243

31/12/08£’000

31/12/09£’000

31/12/10£’000

Opening allowance for credit losses
Losses recognised
Increase in allowance

72
—
—

72
(41)
94

125
(52)
10

Closing provision

72

125

83

2008
£’000

2009
£’000

2010
£’000

Cash at bank and in hand
GBP
EUR
USD
CAD

1,596
230
226
—

1,075
718
603
—

5,424
1,023
344
339

Financial assets

2,052

2,396

7,130

2008
2009
2010

Past due but not impaired
0 – 90 days
>90 days
£’000
£’000

Reconciliation of allowances for credit losses

15. Cash and cash equivalents
Cash and cash equivalents include the following components

Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. The net carrying
value of cash and cash equivalents is considered a reasonable approximation of fair value.

55

16. Equity
16.1 Share Capital
2008
Number£’000

2009
Number£’000

2010
Number£’000

Authorised
Ordinary shares of£0.02 each

500,000,000 10,000 500,000,000 10,000 500,000,000 10,000

Called up, allotted andfully paid
Ordinary shares of£0.02 each

11,755,265

235

11,755,265

235

15,211,490

304

Movements in Ordinary Shares is as follows:
NumberAt 1 January 2008
Shares created on 5:1 share split

2,351,053
9,404,212

At 31 December 2008

11,755,265

At 31 December 2009
Shares issued on option exercises
Shares issued on conversion of Convertible Loan
Shares issued on fund raising

11,755,265
26,50028,3653,401,360

At 31 December 2010

15,211,490

On 24 April 2008 the Company approved a sub-division of Share Capital, whereby each
£0.10 Ordinary Share (and options) be sub-divided into five £0.02 Ordinary Shares (and options).
On 31 May 2010 26,500 options were exercised at a price of £0.64 and on 25 October 2010 28,365
shares were issued at a conversion price of £0.90 instead of requesting repayment of the convertibleloan.
On 18 November 2010 3,401,360 shares were issued in return for funding at a price of £1.47 per£0.02 Ordinary Share.
16.2 Share Premium
Proceeds received in addition to the nominal value of the shares issued during the year have been
included in Share Premium, less registration and other regulatory fees, and net of related tax benefits.
As part of the fund raising in November 2010, expenses of £178,000 were written off against the
Share Premium account.
Sharepremium
account£’000

At 1 January 2008

9,773

At 31 December 2008

9,773

At 31 December 2009
Net premium on new share capital subscribed

9,773
4,777

At 31 December 2010

14,55056

17. Employee remuneration
Expenses recognised for employee benefits (including Directors) are analysed below:
Staff costs for all employees, including Directors, consist of:Wages & salaries
Social security costs
Pension costs
Share Based Compensation Charge

31/12/08£’000

31/12/09£’000

31/12/10
£’000

5,108
529
172
34

5,471
608
238
73

6,724
679
307
18

5,843

6,390

7,728

Pension costs relate to contributions to employee private pension plans or state run schemes.
The average number of employees, including Directors, during the year were:Technical consultants
Research & Development
Sales & Marketing
General & Administrative

31/12/08
Number31/12/09
Number31/12/10
Number

45
10
19
9

47
10
14
8

60
12
18
9

83

79

99

31/12/08£’000

31/12/09£’000

31/12/10
£’000

229
6

139
9

206
17

235

148

223

31/12/08£’000

31/12/09£’000

31/12/10
£’000

110
4

107
9

118
13

114

116

131

Remuneration of Directors

Directors’ emoluments
Company contributions to money purchase schemes

Emoluments of highest paid director

Emoluments
Company contributions to money purchase schemes

All Directors’ remuneration was paid for by Ubisense Ltd. Two of the Directors are members of thepension scheme. (2009: one; 2008: two). Details of the Directors share options can be found in Note 18.

57

Remuneration of key management personnel
31/12/08£’000

31/12/09£’000

31/12/10£’000

Short-term employee benefits:
Salaries including bonuses
Social Security
Other benefits

626
41
7

639
42
11

709
46
12

Total short-term employee benefits

674

692

767

Post-employment benefits:
Defined contribution pension plans

31

58

68

Total post-employment benefits

31

58

68

Share based compensation charge

8

27

6

Number of senior executives at the statement offinancial position date

7

7

7

18. Share options
The Company operates share option schemes in parallel for staff, including Directors, in the UK, US,
German and Canadian organisations.
Options are granted with an exercise price based on the H M Revenue & Customs agreed valuation at
the time of grant. Options held in the Company generally vest over periods of up to three years from thedate of grant. Options are only exercisable in accordance with the Scheme Rules. The options are settled
in equity once exercised. Options not exercised by the 10th anniversary of their grant date lapse.
On 18 March 2010 the repricing of options over 1,602,131 ordinary shares of £0.02 held by employees,
including the Board, was agreed with HMRC. The replacement options have an exercise price of £0.14
and vest over dates from 18 March 2011 to 18 March 2013 and have been accounted for as a modification.
Details of the number of share options and the Weighted Average Exercise Price outstanding during theyear are as follows:
2008
NumberOpening balance
Repricing of options as
noted above

1,530,000

Revised opening balance
Granted during the year
Exercised during the year
Forfeited during the year

1,530,000
247,500—(121,100)

Closing balance
Exercisable at the year end

2009
WAEP
£

Number

0.70 1,656,400

—

—

—

2010
WAEP
£

Number

WAEP£

0.77 1,943,103

0.79

—

—

0.14

0.70 1,656,400
0.90 332,901——
0.90(46,198)

0.77 1,943,103
0.90
34,550—(26,500)
0.90 (111,751)

0.23
0.14
0.64
0.88

1,656,400

0.77 1,943,103

0.79 1,839,402

0.20

1,257,105

0.73 1,682,748

0.77

0.67

201,966

The share options outstanding at the end of the year have a weighted average remaining contractual lifeof 9 years (2009: 7 years; 2008: 8 years) and an exercise price ranging from £0.14 to £0.90. Since theyear end, no options over £0.02 Ordinary Shares have been exercised, granted or cancelled.

58

The fair values below were calculated using the Black Scholes Model. The inputs to the model wereas follows:
Weighted average share price (£)
Expected volatility of share price (%)
Expected time to expiry (years)
Risk free interest rate (%)
Expected dividend yield on shares (%)
Fair value at date of grant (£)

2008

2009

2010

0.90
20
3
5
0
0.188

0.90
20
3
5
0
0.188

0.14
20
3
5
0
0.029

The expected volatility was estimated by management to be 20 per cent. by reference to companies insimilar industries and stage of development. The expected time to expiry of the options has been adjusted,based on the management’s best estimate, for the effects of non-transferability, exercise restrictions andbehavioural considerations.
The Group recognised total expenses of £18,000 (2009: £73,000; 2008: £34,000) related to equity-settled
share-based payment transactions during the year.
The Directors who held office at 31 December 2010, unless stated, had the following interests in options
over Ordinary Shares of the Company as at 31 December 2010:

G M Campbell (appointed 9/9/10)
Prof A Hopper
R T GreenP G Harverson
J K Lomas (appointed 19/12/08)
R G Newell
R Sansom

Options
outstandingat the endof 2008

Options
outstandingat the endof 2009

Options
outstandingat the endof 2010—
15,00048,50087,000————20,27876,27891,333—
1,056—

120,500
20,27876,27891,333—
1,056—

All the options held by the Board, over ordinary shares of £0.02, were exchanged for new options withan exercise price of £0.14 and vest over dates from 18 March 2011 to 18 March 2013. No options were
exercised in the year.
19. Trade and other payables
Trade and other payables recognised in the statement of financial position can be analysed as follows
2008
£’000

2009
£’000

2010
£’000

Trade payables
Trade accruals
Current tax
Other taxation and social security
Other payables

578
914
—
358
1,754

1,133
860
—
313
624

1,945
933
8
717
2,371

Total trade and other payables

3,604

2,930

5,974

The carrying values of trade and other payables are considered to be a reasonable approximation offair value.

5920. Finance income and finance costs
Finance costs may be analysed as follows for the reporting periods presented:
2008
£’000

2009
£’000

2010
£’000

Interest payable – bank
Interest payable – other loans

(142)
(133)

(160)
(70)

(115)
(122)

Finance costs

(275)

(230)

(237)

2008
£’000

2009
£’000

2010
£’000

12

16

5

2008
£’000

2009
£’000

2010
£’000

—
—

1
4

—
23

(121)

(172)

(47)

(121)

(167)

(24)

4

10

21

(117)

(157)

(3)

Finance income may be analysed as follows for the reporting periods presented:

Interest income from cash and cash equivalents

21.
(a)

Taxation on ordinary activities
Analysis of the charge in the year:
Current Tax
In respect of the year

UK Corporation Tax based on the results for the yearat 28% (2009: 28%; 2008: 28.5%)
Foreign tax
Adjustment in respect of prior years– Research and development tax credit
Deferred Tax
Origination and reversal of temporary differences
Tax on profit on ordinary activities(b)

Factors affecting current tax charge:
The tax assessed on the profit on ordinary activities for the year is lower than the standard rate ofcorporation tax in the UK of 28% (2009: 28%; 2008: 28.5%) as follows:
31/12/08£’000

31/12/09£’000

31/12/10£’000

Profit (Loss) on ordinary activities before taxation

(983)

716

395

Tax on profit (loss) on ordinary activities at standard rate
Factors affecting credit for the year:
Expenses not deductible for tax purposes
Other temporary differences(Utilisation)/Creation of tax losses
Prior years’ research and development tax credits
Change in tax rates

(280)

200

111

14
6
264
(121)
—

—
7
(192)
(172)
—

37
(26)
(73)
(47)
(5)

Total actual amount of current tax

(117)

(157)

(3)

Factors that may affect future tax charges
The Group takes advantage of the enhanced tax deductions for Research & Development
expenditure in the UK and expects to continue to be able to do so.

60

22. Cash flow adjustments and changes in working capital
The following non-cash flow adjustments and adjustments for changes in working capital have been madeto profit before tax to arrive at operating cash flow:
Adjustments:
2008
£’000

2009
£’000

2010
£’000

Depreciation and amortisation
Finance income
Finance costs
Movement on share based compensation reserve
Foreign exchange

385
(12)
275
34
(356)

383
(16)
230
73
106

396
(5)
237
18
(12)

Total adjustments

326

776

634

Net changes in working capital:
Change in inventories
Change in trade and other receivables
Change in trade and other payables

—
(279)
1,412

28
(975)
(660)

(100)
(3,244)
3,009

Total changes in working capital

1,133(1,607)(335)

23. Related party transactions
Some of the Directors, or parties connected to them, participate in the Convertible Loans. The loans to
the Company, which were still outstanding at the year end, received interest as follows:
Director, or connected party

G M Campbell(appointed 09/09/10)
R T Green (Richard GreenChildrens’ Trust)P G Harverson
J K Lomas(appointed 19/12/08)
R G Newell
R Sansom

Loan
2008
£’000

Interest
2008
£’000

Loan
2009
£’000

Interest
2009
£’000

Loan
2010
£’000

Interest
2010
£’000

—

—

—

—

31

1

108
5

7
—

108
10

3
—

108
10

3
—

35
25
400

2
2
27

35
50
800

1
1
18

35
50
800

1
1
20

The figures represent all loans and interest in the year for any year that the Director served for any partof that year.
24. Financial instrument risks
Risk management objectives and policies
The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets
and liabilities by category are summarised in note 11. The main types of risks are market risk, credit risk
and liquidity risk.
The Group’s risk management is coordinated at its headquarters, in close cooperation with the board of
directors, and focuses on actively securing the Group’s short to medium-term cash flows.
The Group does not actively engage in the trading of financial assets for speculative purposes. The mostsignificant financial risks to which the Group is exposed are described below.
The Group is exposed to market risk through its use of financial instruments and specifically to currency
risk and interest rate risk, which result from its operating activities.

61

24.1 Foreign currency sensitivity
The Group’s base currency is pounds sterling (GBP). Exposure to currency exchange rates arises
where balances are in a currency other than the functional currency of the entity which holds thebalance, primarily US dollars (USD) and Euro (EUR).
The Group does not enter into forward exchange contracts to mitigate the exposure to foreign
currency risk as the Group’s currency transactions are not considered significant enough towarrant this.
An adverse movement in the dollar of 5 per cent. would result in a reduction in the Group’s assetsof £64,000 (2009: £86,000; 2008: £64,000). An adverse movement in the Euro of 5 per cent. would
result in a reduction of the Group’s assets of £78,000 (2009: £73,000; 2008: £16,000) and theimpact on the Group’s profit/loss would be £140,000 (2009: £115,000; 2008: £46,000).
The carrying amounts of the Group’s US Dollar and Euro denominated monetary assets andliabilities outside the functional currency entity at the reporting date is as follows:
2008

AssetsLiabilities

2009

2010

US $
£’000

Euro
£’000

US $
£’000

Euro
£’000

US $
£’000

Euro
£’000

—
22

—
14

382
13

107
6

330
64

351
—

In addition an element of the Group’s revenue and overhead transactions is completed in a foreign
currency. Transaction exposure is hedged through the use of currency bank accounts.
24.2 Interest rate sensitivity
The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing
through management of levels of external debt. At 31 December 2010, the Group is exposed tochanges in market interest rates through bank borrowings at variable interest rates. An increase in
the interest rate of 5 per cent. would result in an increased payment of £46k over the remaining lifeof the loan.
The Group’s borrowings are summarised in note 11.2.
24.3 Credit risk analysis
The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets
recognised at the reporting date, as summarised in note 14 and note 15.
Cash and cash equivalents are held at banks with good independent credit ratings.
The Group continuously monitors defaults of customers and other counterparties, identified either
individually or by group, and incorporates this information into its credit risk controls. Whereavailable at reasonable cost, external credit ratings and/ or reports on customers and othercounterparties are obtained and used.
The Group’s policy is to deal only with creditworthy counterparties. The Group’s management
considers that all the above financial assets that are not impaired or past due for each of thereporting dates under review are of good credit quality. All receivables are subject to regular review
to ensure that they are recoverable and any issues identified as early as possible.
None of the Group’s financial assets are secured by collateral or other credit enhancements.
24.4 Liquidity risk analysis
Liquidity risk is the risk arising from the Group not being able to meet its obligations as they falldue. The Group manages its liquidity needs by carefully monitoring scheduled debt servicing
payments for long-term financial liabilities as well as forecast cash inflows and outflows due in
day-to-day business. Net cash requirements are compared to available borrowing facilities in orderto determine headroom or any shortfalls. This analysis shows if available borrowing facilities are
expected to be sufficient and the need for securing finance from its shareholder base.
62

The Group’s financial liabilities have contractual maturities as summarised below:

As at 31 December 2008
Trade and other payables
Loans and borrowings
As at 31 December 2009
Trade and other payables
Loans and borrowings
As at 31 December 2010
Trade and other payables
Loans and borrowings

Within6 months£’000

Current
Between
6 and 12 months£’000

Non-Current
BetweenLater than
1 and 5 years
5 years
£’000
£’000

3,246
—

—
—

—
3,275

—
—

2,617
92

—
181

—
3,678

—
—

5,249
2,213

—
209

—
1,397

—
—

Financial assets used for managing liquidity risk
Cash flows from trade and other receivables are contractually due within six months.
Cash is generally held in accounts with immediate notice. Where surplus cash deposits are
identified these are placed in accounts with access terms of no more than 30 days.
25. Capital management policies and procedures
The Group’s capital management objectives are to ensure the Group’s ability to continue as a going
concern by securing sufficient funding through equity and debt.
The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity andfinancial liabilities. The Group manages the capital structure and makes adjustments to it in the light ofchanges in economic conditions and the strategic plans of the business. In order to maintain or adjust thecapital structure and provide funds to support the planned growth, the Group may issue new shares orraise other funds through debt.
During 2010 the Group issued 3,401,360 Ordinary shares raising £5,000,000 to provide funds for thegrowth and development of the Group.
The Group is not subject to externally imposed capital requirements.
26. First-time adoption of IFRS
These are the Group’s first consolidated financial statements prepared in accordance with International
Financial Reporting Standards (IFRS). The date of transition to IFRS is 1 January 2008.
The Group’s IFRS accounting policies presented in note 3 have been applied in preparing the financial
statements for the year ended 31 December 2010, the comparative information and the opening statementof financial position at the date of transition, 1 January 2008.
The Group has applied IFRS 1 First-time Adoption of International Financial Reporting Standards (asrevised in 2008) in preparing the historical financial information. The effects of the transition to IFRS
on equity, total comprehensive income and reported cash flows are presented in this section and arefurther explained in the notes that accompany the tables.
The amount of goodwill at the date of transition relates to the RTLS and Geospatial cash generating
units. In addition there was £161,000 of goodwill relating to the acquisition of Terraprise Inc, a technicalconsulting business in the geospatial sector. At the date of transition no revenue streams could be related
directly to this acquisition and the goodwill has therefore been fully impaired.

63

26.1 First-time adoption exemptions applied
Upon transition, IFRS 1 permits certain exemptions from full retrospective application. The Group
has applied the mandatory exemptions and certain optional exemptions. The exemptions adopted
by the Group are set out below.
•

Financial assets and liabilities that had been de-recognised before 1 January 2008 underprevious GAAP have not been recognised under IFRS.

•The Group has used estimates under IFRS that are consistent with those applied underprevious GAAP (with adjustment for accounting policy differences).

•

The Group has elected not to apply IFRS 3 retrospectively to its past business combinations
prior to the date of transition and goodwill acquired thereon remains frozen.

26.2 Reconciliation of equity
Equity at the date of transition, 1 January 2008, can be reconciled to the amounts reported underprevious GAAP as follows:

UK GAAP Format

Fixed Assets
Intangible assets –Goodwill
Other intangible assets
Tangible assets
Current assets
Stock and work in progress
Debtors
Investments – treasury
deposits
Cash at bank and in hand
Creditors: amounts
falling due within one year
Creditors: amounts falling
due within one year
Creditors: amounts
falling due after morethan one year
Creditors: amounts fallingdue after more than one year
Deferred tax

UK GAAP£’000

Presentationalandtransitional
differences
£’000

IFRS
£’000

IFRS Format

Non-current assets
6,230
—
268

(161)
351
—

6,069
351
268

Goodwill
Other intangible assets
Property, plant and equipment

6,498

190

6,688

Total non-current assets

292
2,416

—
—

292
2,416

Current assets
Inventories
Trade and other receivables

356
400

(356)
356

—
756

Cash and cash equivalents

3,464

—

3,464
Current liabilities(2,214)—(2,214) Trade and other payables

Non-current liabilities(1,754)——(105)

Net assets

5,994

85

6,079

Net assets

Capital and Reserves
Called Up Share capital
Share premium accountFRS 25 Equity reserve
FRS 20 Option reserve
Foreign exchange reserve
Profit and loss account

235
9,773
289
421
38
(4,762)

—
—
—
—
—
85

235
9,773
289
421
38
(4,677)

EquityShare capital
Share premium accountEquity reserve
Option reserve
Foreign exchange reserve
Retained earnings

Total equity

5,994

85

6,079

Total equity

64(1,754) Loans and borrowings(105) Deferred tax

Transitional differences between IFRS and previous GAAP arose due to:•Capitalisation of R&D expenditure in other intangible assets•

Related deferred tax on capitalised intangible assets•

Impairment of the goodwill relating to Terraprise Inc

Presentational differences between IFRS and previous GAAP arose due to:•

Reclassification of investments – treasury deposits as cash equivalents

Equity at 31 December 2008 can be reconciled to the amounts reported under previous GAAP
as follows:

UK GAAP Format

Fixed Assets
Intangible assets –Goodwill
Other intangible assets
Tangible assets
Current assets
Stock and work in progress
Debtors
Cash at bank and in hand

UK GAAP£’000

Presentationalandtransitional
differences
£’000

IFRS
£’000

IFRS Format

Non-current assets
5,516
—
247

553
390
—

6,069
390
247

Goodwill
Other intangible assets
Property, plant and equipment

5,763

943

6,706

Total non-current assets

292
2,695
2,052

—
—
—

292
2,695
2,052

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

5,039

—

5,039

(3,604)—Current liabilities(3,604) Trade and other payables

Creditors: amounts falling
due within one year
Creditors: amounts falling
due within one year
Creditors: amounts
falling due after morethan one year
Creditors: amounts fallingdue after more than one year
Deferred tax(2,869)——(109)(2,869) Loans and borrowings(109) Deferred tax

Net assets

4,328

835

5,163

Net assets

Capital and Reserves
Called Up Share capital
Share premium accountFRS 25 Equity reserve
FRS 20 Option reserve
Foreign exchange reserve
Profit and loss account

235
9,773
357
455
(53)
(6,439)

—
—
—
—
(61)
896

235
9,773
357
455
(114)
(5,543)EquityShare capital
Share premium accountEquity reserve
Option reserve
Foreign exchange reserve
Retained earnings

Total equity

4,328

835

5,163

Total equity

Non-current liabilities

Transitional differences between IFRS and previous GAAP arose due to:•Capitalisation of R&D expenditure in other intangible assets•

Related deferred tax on capitalised intangible assets

65

•Impairment of the goodwill relating to Terraprise Inc and the effect of goodwill not being
subject to amortisation under IFRS

Equity at 31 December 2009 can be reconciled to the amounts reported under previous GAAP
as follows:

UK GAAP Format

Fixed Assets
Intangible assets –Goodwill
Other intangible assets
Tangible assets
Current assets
Stock and work in progress
Debtors
Cash at bank and in hand

UK GAAP£’000

Presentationalandtransitional
differences£’000

IFRS Format

Non-current assets
4,716
—
162

1,353
424
—

6,069
424
162

Goodwill
Other intangible assets
Property, plant and equipment

4,878

1,777

6,655

Total non-current assets

264
3,656
2,396

—
—
—

264
3,656
2,396

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

6,316

—

6,316

—

(244)

Current liabilities(244) Loans and borrowings(3,174)244(2,930) Trade and other payables(3,174)—(3,174)Creditors: amounts
falling due within one year
Creditors: amounts falling
due within one year

IFRS
£’000

Creditors: amounts
falling due after morethan one year
Creditors: amounts fallingdue after more than one year
Deferred tax(3,379)——(119)(3,379) Loans and borrowings(119) Deferred tax

Net assets

4,641

1,658

6,299

Net assets

Capital and Reserves
Called Up Share capital
Share premium accountFRS 25 Equity reserve
FRS 20 Option reserve
Foreign exchange reserve
Profit and loss account

235
9,773
499
528
(26)
(6,368)

—
—
—
—
(40)
1,698

235
9,773
499
528
(66)
(4,670)EquityShare capital
Share premium accountEquity reserve
Option reserve
Foreign exchange reserve
Retained earnings

Total equity

4,641

1,658

6,299

Total equity

Non-current liabilities

Transitional differences between IFRS and previous GAAP arose due to:•Capitalisation of R&D expenditure in other intangible assets•

Related deferred tax on capitalised intangible assets•

Impairment of the goodwill relating to Terraprise Inc and the effect of goodwill not being
subject to amortisation under IFRS

66

Presentational differences between IFRS and previous GAAP arose due to:•

Split of loans and other borrowings under IFRS in current liabilities

26.3 Reconciliation of total comprehensive income
Total comprehensive income for the reporting period ended 31 December 2008 can be reconciled
to the amounts reported under previous GAAP as follows:

UK GAAP£’000

Presentationalandtransitional
differences£’000

TurnoverCost of sales

9,693(6,323)——

9,693 Revenue(6,323) Cost of Sales

Gross Profit
Administrative expenses

3,370(4,905)—815

3,370 Gross Profit(4,090) Administrative expenses

Operating Loss
Finance income
Finance charges(1,535)
12
(275)

815
—
—

(720) Operating Loss
12 Finance income(275) Finance costs(1,798)815(983) Loss before tax

121

(4)

117

(1,677)

811

(91)

(61)

(866) Loss for the year
Foreign exchange on(152) consolidation(1,768)750

UK GAAP Format

Loss on Ordinary
Activities before Taxation
Tax on Loss on Ordinary
Activities
Loss for the Financial Year
Foreign exchange on
consolidation
Total comprehensive
income for the year

IFRS
£’000

IFRS Format

Income tax income

Total comprehensive income(1,018) for the year

Transitional differences between IFRS and previous GAAP arose due to:•Capitalisation of R&D expenditure•

The effect of goodwill not being subject to amortisation under IFRS

67

Total comprehensive income for the reporting period ended 31 December 2009 can be reconciled
to the amounts reported under previous GAAP as follows:

UK GAAP£’000

Presentationalandtransitional
differences£’000

TurnoverCost of sales

14,985(9,658)——14,985 Revenue(9,658) Cost of Sales

Gross Profit
Administrative expenses

5,327(5,209)—812

5,327 Gross Profit(4,397) Administrative expenses

Operating Profit
Finance income
Finance charges

118
16
(230)

812
—
—

930 Operating Profit
16 Finance income(230) Finance costs(Loss)/Profit on Ordinary
Activities before Taxation
Tax on Profit/(Loss) on
Ordinary Activities

(96)

812

716

(Loss) Profit before tax

167

(10)

157

Income tax income

UK GAAP Format

IFRS
£’000

IFRS Format

Profit for the Financial Year
Foreign exchange on
consolidation

71

802

873

27

21

48

Profit for the year
Foreign exchange on
consolidation

Total comprehensive income
for the year

98

823

921

Total comprehensive income
for the year

Transitional differences between IFRS and previous GAAP arose due to:•Capitalisation of R&D expenditure•

The effect of goodwill not being subject to amortisation under IFRS

26.4 Reconciliation of cash flows
The components of cash and cash equivalents under previous GAAP are similar to those presented
under IFRS.
The only difference is the capitalisation of the investment in development costs of £389k (2009:£302k; 2008: £258k), which is now classified as investing activities and was previously disclosed
under operating activities in the cash flow for UK GAAP.

68

PART 4
ADDITIONAL INFORMATION
1.
1.1

The Company and its Subsidiaries
The Company was incorporated in England and Wales on 11 October 2005 under the name of
Ubisense Trading Limited with registered number 05589712 as a private company limited by shares
under the Companies Act 1985.

AR Anx 1 –5.1.2; 5.1.3

1.2

On 31 May 2011 the Company changed its name to Ubisense Group plc and re-registered as apublic limited company.

AR Anx 1 –
5.1.1

1.3

The Company’s registered office and its principal place of business is at St. Andrew’s House,
90 St. Andrew’s Road, Chesterton, Cambridge, Cambridgeshire CB4 1DL, its telephone number
is +44 (0) 1223 535170 and it is domiciled in the United Kingdom.

AR Anx 1 –
5.1.4

1.4

The Company trades under the name Ubisense.

AR Anx 1 –
5.1.1

1.5

The principal legislation under which the Company operates and under which the Placing Shares
have been issued and conditionally alloted is the Companies Act and the regulations made thereunder.

AR Anx 3 –
4.2

1.6

The Company has the following significant subsidiary undertakings. The Company owns 100 per cent.
of the issued shares of each of the companies and can exercise 100 per cent. of the voting rights. Other
than set out in this Part 4, none of the share capital of any member of the Group is under option or
agreed conditionally or unconditionally to be put under option.

AR Anx 1 –7.2;
AR Anx 1 –25
AR Anx –21.1.6

2.
2.1

Name

Principal Activity

Country ofIncorporation

Ubisense Limited

UK operating company

UK

Ubisense AG

German operating company

Germany

Ubisense Inc.

US operating company

US

Ubisense Solutions Inc.

Canadian operating company

CanadaUbisense SAS

French operating company

FranceRegistered Office

St. Andrew’s House
90 St. Andrew’s Road
Chesterton
Cambridge Cambridgeshire
CB4 1DLADAC Haus
Freie-Vogel-Str. 393
44269 Dortmund
Germany
108 West 13th Street
Wilmington
Delaware 19801
US
349 W. Georgia Street
PO Box 2690 Station Main
VancouverBC V6B 3W8
Canada52 Boulevard Sebastopol
75003 Paris
FranceShare Capital of the Company
The share capital history of the Company from the date of the Company’s incorporation to the dateof this document is as follows:
2.1.1 The Company was incorporated with an authorised share capital of £10,000,000 divided
into 100,000,000 ordinary shares of £0.10 each. On incorporation, 20 ordinary shares of£0.10 each were subscribed for by the subscribers and each such share was fully paid or
was credited as fully paid.
69

AR Anx 1 –21.1.7
AR Anx 1 –21.1.6

2.1.2 On 24 November 2005, the Company allotted an aggregate of 1,508,900 ordinary shares of£0.10 each following which the total issued share capital was 1,508,920 ordinary shares of£0.10 each.
2.1.3 On 13 December 2005, the Company allotted an aggregate of 421,600 ordinary shares of£0.10 each following which the total issued share capital was 1,930,520 ordinary shares of£0.10 each.
2.1.4 On 14 December 2005, the Company allotted an aggregate of 147,380 ordinary shares of£0.10 each following which the total issued share capital was 2,077,900 ordinary shares of£0.10 each.
2.1.5 On 5 January 2006, the Company allotted an aggregate of 259,603 ordinary shares of£0.10 each following which the total issued share capital was 2,337,503 ordinary sharesof £0.10 each.
2.1.6 On 15 December 2006, the Company allotted an aggregate of 10,100 ordinary shares of£0.10 each following which the total issued share capital was 2,347,603 ordinary shares of£0.10 each.
2.1.7 On 15 June 2007, the Company allotted an aggregate of 3,000 ordinary shares of £0.10 eachfollowing which the total issued share capital was 2,350,603 ordinary shares of £0.10 each.
2.1.8 On 15 October 2007, the Company allotted an aggregate of 450 ordinary shares of £0.10 eachfollowing which the total issued share capital was 2,351,053 ordinary shares of £0.10 each.
2.1.9 On 24 April 2008, the Company passed a resolution to subdivide all the 100,000,000
ordinary shares of £0.10 each in the capital of the Company into 500,000,000 ordinary
shares of £0.02 each following which the total issued share capital was 11,755,265 ordinary
shares of £0.02 each.
2.1.10 On 31 March 2010, the Company allotted an aggregate of 26,500 Ordinary Shares following
which the total issued share capital was 11,781,765 Ordinary Shares.
2.1.11 On 25 October 2010, the Company allotted an aggregate of 28,365 Ordinary Sharesfollowing which the total issued share capital was 11,810,130 Ordinary Shares.
2.1.12 On 18 November 2010, the Company allotted an aggregate of 3,401,360 Ordinary Sharesfollowing which the total issued share capital was 15,211,490 Ordinary Shares.
2.1.13 Between 25 March 2011 and 30 March 2011, the Company allotted an aggregate of 71,119
Ordinary Shares following which the total issued share capital was 15,282,609 Ordinary Shares.
2.1.14 On 30 April 2011, the Company allotted an aggregate of 2,213,452 Ordinary Shares on
conversion of the 2007 Convertible Loans following which the total issued share capital
was 17,496,061 Ordinary Shares.
2.1.15 Between 16 May 2011 and 14 June 2011, the Company allotted an aggregate of 69,249
Ordinary Shares following which the total issued share capital was 17,565,310 Ordinary Shares.
2.2

The Companies Act no longer requires companies to have an authorised share capital and therefore
the Articles do not contain reference to an authorised share capital. The Directors are still however
limited to the number of shares they can at any time allot as authority to allot continues to berequired under the Companies Act.

2.3

On 21 April 2011, the Company passed a number of resolutions to authorise the Directors to allot
shares and/or grant rights to subscribe for or to convert any security into shares (“Rights”). Theseauthorities provide that the Directors are authorised to allot Rights:
2.3.1 up to an aggregate nominal value of £200,000 in connection with the Placing;70

AR Anx 1 –21.1.1(a)2.3.2 up to an aggregate nominal value of £190,000 or, if less, the nominal value of one third of
the issued share capital of the Company immediately following Admission; and2.3.3 up to an aggregate nominal value of £47,000 in connection with options granted inaccordance with the Company’s previous articles of association (see paragraph 2.6 of thisPart 4 below).
2.4

Unless the authority referred to in paragraph 2.3.2 above is used for the purpose of a pre-emptive
offer of Rights to all Shareholders (other than certain limited exclusions), the Directors’ ability toutilise such authority is limited to the allotment of equity securities up to a maximum aggregate
nominal value of £85,000 or, if less, the nominal value of 15 per cent. of the issued share capital of
the Company immediately following the Admission.

2.5

The authority referred to in paragraph 2.3.1 above constitutes sufficient authority to enable the
Directors to grant the Canaccord Warrants on Admission (as defined and as more particular
described in paragraph 10.12 of this Part 4).

2.6

The Company passed a resolution on 24 April 2008 which authorised the Directors to grant options
over Ordinary Shares subject to a maximum of 20 per cent. of the share capital of the Company inissue from time to time and the Company amended its articles of association at the time to giveeffect to such resolution. The Company’s articles of association that will have effect from Admission
contain no such authority. The options that have previously been granted by the Company pursuant
to such authority are explained in more detail in paragraph 4 of this Part 4. The Directors need toensure that they maintain sufficient authority to allot Ordinary Shares that will arise on the exerciseof such options and the authority referred to in paragraph 2.3.3 gives the Directors such authority.

2.7

The Placing will result in the issue of 2,777,778 New Ordinary Shares. The allotment of theAdditional Shares will result in the issue of 1,078,670 Ordinary Shares. The following table shows
the issued share capital of the Company (i) as at the date of this document; and (ii) as it will be
immediately following Admission:

Current
Immediately following Admission

Class of share

Issued, called up and fully paid
AmountNumberOrdinary
Ordinary£351,306.20£428,435.16

AR Anx 1 –4.6

AR Anx 1 –4.7

AR Anx 1 –4.1;
21.1.1(b)17,565,310
21,421,758

2.8

All of the shares in the capital of the Company are fully paid and are ordinary shares of £0.02 each.

2.9

There is no share capital of the Company (nor will there be immediately following Admission) heldby or on behalf of the Company itself or by any subsidiary of the Company.

2.10 Save for the Convertible Loan and the HSBC Warrants, there are no convertible securities,
exchangeable securities or securities with warrants that have been issued by the Company.
2.11 Save as disclosed in paragraph 4 of this Part 4, no share capital of the Company or any of its
subsidiaries is under option or agreed conditionally or unconditionally to be put under option and
the Company has not given any undertaking to increase its capital.

AR Anx 1 –4.1;
21.1.1(b);21.1.1(c)AR Anx 1 –21.1.3
AR Anx 1 –21.1.4
AR Anx 1 –21.1.52.12 The share capital reconciliation as required to be disclosed by the AIM Rules for Companies is
as follows:

Issued Ordinary Shares

As at
1 January 2010

As at
31 December 2010

11,755,265

15,211,490

2.13 With effect from Admission, all of the Ordinary Shares will be in registered form and will be capableof being held either in certificated or uncertificated form.

71

AR Anx 3 –4.3

2.14 The Ordinary Shares are, and the New Placing Shares will be, denominated in sterling.
2.15 Each New Placing Share will rank in full for all dividends and distributions declared made or paid
after their issue and otherwise pari passu in all respects with each Existing Ordinary Share, andwill have the same rights (including voting and dividend rights and rights on a return of capital)
and restrictions as each Existing Ordinary Share, as set out in the Articles.

AR Anx 3 –4.4
AR Anx 3 –4.5

3.
Articles of Association
The New Articles contain, amongst other things, provisions to the following effect:
3.1

Objects
3.1.1 Pursuant to section 31 of the Act, the objects for which the Company is established are
unrestricted and the Company shall have full power and authority to carry out any object
not prohibited by law.

AR Anx 1 –
3.1

3.2

Voting rights
3.2.1 Subject to any special terms as to voting upon which any shares may, for the time being,
be held, at any general meeting on a show of hands every member who (being an
individual) is present in person or by proxy or who (being a corporation) is present by aduly authorised representative shall have one vote and on a poll every member present inperson or by proxy or by a representative shall have one vote for every ordinary share in
the capital of the Company held by him. A proxy need not be a member of the Company.

AR Anx 1 –21.2.3;21.2.5

3.3

Variation of rights
3.3.1 If at any time the capital of the Company is divided into different classes of shares or any
other rights or privileges attached to any class of shares in the Company and subject tothe provisions of the Act and of the New Articles, the special rights attached to any classof share in the Company may be varied or abrogated either with the consent in writing of
the holders of not less than three quarters in nominal value of the issued shares of the class(excluding any shares of that class held as treasury shares) or with the sanction of a special
resolution passed at a separate general meeting of the holders of the shares of the class(but not otherwise) and may be so varied or abrogated whilst the Company is a going
concern or while the Company is or is about to be in liquidation. At every such separate
general meeting (except an adjourned meeting) the quorum shall be at least two persons
holding or representing by proxy at least one-third of the nominal amount paid up on theissued shares of the relevant class.

AR Anx 1 –21.2.3;21.2.4;22.2.8

3.4

Changes in share capital
3.4.1 The Company may alter its share capital as follows:

AR Anx 1 –21.2.3;21.2.4;21.2.6;22.2.8(i)it may by ordinary resolution increase its share capital, consolidate and divide all or
any of its share capital into shares of a larger nominal value, sub-divide all or any of
its shares into shares of a smaller nominal value and cancel any shares which havenot been taken or agreed to be taken by any person;(ii)

subject to the provisions of the Act and to any rights for the time being attached toany shares, it may by special resolution reduce or cancel its share capital, any capital
redemption reserve, any share premium account or other undistributable reserve inany manner; and(iii) subject to the provisions of the Act and to any rights for the time being attached toany shares, it may purchase its own shares (including any redeemable shares),provided that the Company shall not purchase any of its shares unless such purchasehas been sanctioned by a special resolution passed at a separate meeting of theholders of any class of shares convertible into equity share capital of the Company.

72

3.5

Transfer of shares
3.5.1 A member may transfer all or any of his shares, save for those shares held in uncertificatedform title to which may be transferred by means of a relevant system such as CREST
without a written instrument, by an instrument of transfer in writing in any usual form orin any other form approved by the Board. The instrument of transfer of a certificated share
shall be executed by or on behalf of the transferor and, except in the case of fully paid
shares, by or on behalf of the transferee. The Board may, in its absolute discretion, refuse
to register a transfer of any share held in certificated form unless it is:(i)in respect of a share which is not fully paid up;(ii)

in respect of a share on which the Company has no lien;

AR Anx 1 –21.2.3;21.2.6;22.2.8AR Anx 3 –3.4.8(iii) in respect of only one class of share;(iv) in favour of a single transferee or not more than four joint transferees;(v)

duly stamped (if required); and(vi) lodged at the registered office together with the relevant share certificate(s) and suchother evidence as the Board may reasonably require to show the right of thetransferor to make the transfer,provided that the Board does not exercise such discretion to prevent dealings in the sharesfrom taking place on an open and proper basis.

3.6

3.5.2

The Board may also refuse to register a transfer of shares (whether fully paid or not) whichis in favour of more than four persons jointly.

3.5.3

If the Board refuses to register a transfer it must, within 2 months after the date on which
the transfer was lodged with the Company, send notice of the refusal to the transferee
along with its reasons for refusal.

Uncertificated shares
3.6.1 The Company may issue shares and other securities which do not have certificates andpermit existing shares and other securities to be held without certificates.
3.6.2

3.7

A member may transfer all or any of his uncertificated shares by means of a relevant
system, as defined in the Uncertificated Securities Regulations, which includes CREST.
The Directors may refuse to register any transfer of an uncertificated share wherepermitted by the Uncertificated Securities Regulations. If the Directors refuse to registera transfer of an uncertificated share they shall, within two months of the date on which
the transfer instruction relating to such a transfer was received by the Company, send to
the transferee notice of the refusal.

Dividends
3.7.1 Subject to the provisions of the Act and of the New Articles and to any special rights
attaching to any shares, the Company may by ordinary resolution in a general meeting
declare dividends, provided that no dividend shall be paid otherwise than out of profitsand no dividend shall exceed the amount recommended by the Board. The Board mayfrom time to time pay such interim dividends as appear to the Board to be justified by the
profits available for distribution and the position of the Company.
3.7.2

AR Anx 1 –21.2.3

Except as otherwise provided by the New Articles, all dividends shall be declared andpaid according to the amounts paid up on the shares on which the dividend is paid.
Generally, all dividends shall be apportioned and paid proportionately to the amounts paid
up on the shares during any portion or portions of the period in respect of which thedividend is paid.

73

AR Anx 1 –21.2.3
AR Anx 3 –4.5

3.7.3No amount paid or credited as paid in advance of calls shall be regarded as paid on sharesfor this purpose. Unless otherwise provided by the rights attached to any share, nodividends in respect of a share shall bear interest.

3.7.4

The Board may, with the prior authority of an ordinary resolution of the Company, offer
the holders of Ordinary Shares the right to elect to receive Ordinary Shares credited as
fully paid instead of cash in respect of all or part of any dividend. The Board may, at its
discretion, make the right to participate in any such elections subject to restrictions
necessary or expedient to deal with legal, regulatory or other difficulties in respect ofoverseas shareholders.

3.7.5

Any dividend unclaimed for a period of 12 years after the payment date for such dividend
shall (if the Board so resolves) be forfeited and cease to remain owing by the Company
and shall thereafter revert to the Company absolutely.

3.8

Return of Capital
3.8.1 On a winding-up or other return of capital of the Company, the members will be entitledto share in any surplus assets. A liquidator may, with the sanction of a special resolutionof the Company and any other sanction required by the Act, divide amongst the membersin specie or in kind the whole or any part of the assets to be set as such value and in suchmanner as shall be deemed fair by the liquidator. A liquidator, with the sanction of a special
resolution, may also vest the whole or any part of the assets of the Company in trustees
on trusts for the benefit of the members.

3.9

Pre-emption rights
3.9.1 There are no rights of pre-emption under the New Articles in respect of transfers of issued
Ordinary Shares.
3.9.2

AR Anx 1 –21.2.6;22.28
AR Anx 3 –4.8

In the majority of circumstances (unless dis-applied by special resolution), the Company’s
shareholders will have statutory pre-emption rights under the Act in respect of the allotmentof new equity securities in the Company. These statutory pre-emption rights require theCompany to offer new equity securities for allotment to existing shareholders on a pro rata
basis before allotting them to other persons. In such circumstances, the procedure for the
exercise of such statutory pre-emption rights would be set out in the documentation bywhich such equity securities would be offered to the Company’s shareholders.

3.10 Shareholder Meetings
3.10.1 Annual general meetings should be held within the time periods specified by the Act.
Other general meetings may be called whenever the Directors think fit or when one has
been requisitioned in accordance with the Act. Two members present in person or by proxy(or being a corporation, present by a duly appointed representative) at the meeting andentitled to vote shall be a quorum for all purposes.
3.10.2 Annual general meetings are called on at least 21 days notice in writing, exclusive of the
day of which the notice is served or deemed to be served and of the day on which themeeting is to be held. Other general meetings are to be called on 14 days notice in writing
exclusive of the day on which the notice is served or deemed to be served and the day on
which the meeting is to be held. Notice is to be given to all members on the register at theclose of business on a day determined by the Company, such day being not more than
21 days before the day that the notice of meeting is sent.
3.10.3 The Company may specify in the notice of meeting a time, at least 48 hours before thetime fixed for the meeting, by which a person must be entered into the register in order tohave the right to attend or vote at the meeting. In every notice calling a meeting of theCompany there shall appear with reasonable prominence a statement that a member
entitled to attend and vote or a person nominated pursuant to the New Articles is entitledto appoint one or more proxies to attend and, on a poll vote instead of him/her, and that a
proxy need not be a member.
74

AR Anx 1 –21.2.5

3.11 Untraceable shareholders
3.11.1 The Company is entitled to sell, at the best price reasonably obtainable, any share, of amember who is untraceable, provided that:(i)all cheques or warrants for any sums payable in cash to the holder of such shares
have remained uncashed and each attempt to make a payment in respect of the sharesby means of bank transfer or other method for the payment of dividends has failed
for a period of 12 years;(ii)

during the 12 year period, at least three dividends (whether interim or final) inrespect of the shares in question have become payable and no dividend during that
period has been claimed by the member;(iii) the Company has not during that time or before the expiry of the three-month period
referred to in paragraph (iv) below received any communication in respect of suchshare from such member or person entitled; and(iv) upon expiry of the 12 year period, the Company has caused an advertisement to be
published in newspapers in the manner stipulated by the Articles, giving notice of
its intention to sell these shares, and a period of three months has elapsed since suchadvertisement and the Stock Exchange has been notified of such intention.
3.11.2 The net proceeds of any such sale shall belong to the Company and when the Company
receive these net proceeds the Company shall become indebted to the former member for
an amount equal to such net proceeds and the Company shall enter the name of suchformer or other person in the books of the Company as a creditor for such amount.
3.12 Directors
3.12.1 Directors may be appointed by the Company by an ordinary resolution of the Board, either
to fill a vacancy or as an addition to the existing Board. If appointed by the Board, that
Director holds office until the next annual general meeting, at which he shall be eligible
for re-election but shall not be taken into account in determining the number of Directors
who are to retire by rotation at the meeting.
3.12.2 At every annual general meeting one third of the Directors shall retire from office, or if
their number is not three or a multiple of three, the number nearest to but not exceeding
one third shall retire from office by rotation.
3.12.3 At the meeting at which a Director retires under any provision of the Articles, the retiring
Director shall be deemed to have been re-appointed except where:(i)that Director has given notice to the Company that he is unwilling to be elected; or(ii)

at such meeting it is expressly resolved not to fill such vacated office or a
resolution for the re-appointment of such Director shall have been put to themeeting and not passed.

3.12.4 No Director shall vacate his office or be ineligible for appointment or re-appointment asa Director by reason only of his having attained any particular age, nor will special notice
be required of any resolution appointing or approving the appointment of such a Director
or any notice be required to state the age of the person to whom such resolution relates.
3.12.5 As is usual for quoted companies, the New Articles contain a cap on the aggregate fees
which the Directors shall be entitled to receive for their services in the office of director(other than remuneration for Executive Directors). The New Articles state that these fees
shall not exceed £400,000 per annum (exclusive of VAT if applicable), or such other sum
as may from time to time be determined by an ordinary resolution of the Company. The
actual fees paid (unless otherwise directed by any resolution of the Company by which alimit is approved) shall be determined by the Directors and shall be paid in suchproportions and in such manner as the Board may determine.
75

AR Anx 1 –21.2.2

3.12.6 All the Directors (including alternate directors) are entitled to be repaid out of the fundsof the Company all reasonable travelling, hotel and other expenses properly incurred bythem in or about the performance of their duties as Directors, including their expenses oftravelling to and from meetings of the Directors, committee meetings or general meetings.
3.12.7 If by arrangement with the Board any Director performs any special duties or services
outside his ordinary duties as a Director and not in his capacity as a holder of employment
or executive office, he may be paid such reasonable additional remuneration which may
be by a lump sum or by way of salary, commission, participation in profits or otherwise
as the Board may determine.
3.12.8 A Director may act by himself or his firm in a professional capacity (other than as auditor)and he or his firm shall be entitled to remuneration for professional services as if he were
not a Director.
3.12.9 The remuneration and other terms and conditions of appointment of a Director appointed
as managing director or to chief executive office of the Company shall from time to time(without prejudice to the provisions of any agreement between him and the Company) be
fixed by the Board on such terms as the Board thinks fit.
3.12.10 Any statutory provision which, subject to the provisions of the New Articles, would havethe effect of rendering any person ineligible for appointment as a director or liable to vacate
office as a director on account of his having reached any specified age or of requiring
special notice or any other special formality in connection with the appointment of any
director over a specified age shall not apply to the Company.
3.13 Directors’ interests in contracts
3.13.1 Save as provided in the New Articles or by the terms of any authorisation given by the
Directors, a Director shall not vote on, or be counted in the quorum in relation to, any
resolution of the Board or any committee of the Board in respect of any contract,
arrangement, transaction or any proposal whatsoever in which he has any material interestor duty which (otherwise than by virtue of an interest in shares or debentures or othersecurities of or otherwise in or through the Company) conflicts or may conflict with theinterests of the Company and if he shall do so his vote shall not be counted, nor in relation
thereto shall he be counted in the quorum present at the meeting.
3.13.2 If a question arises as to the right of a Director to vote or be counted in the quorum andsuch question is not resolved by his voluntarily agreeing to abstain from voting or not tobe counted in the quorum, the question may, before the conclusion of the meeting, bereferred to the chairman (or vice chairman should the question concern an interest of thechairman) of the meeting and his ruling shall be final and conclusive, except in a casewhere the nature or extent of the interest has not been fairly disclosed and provided thatany such question shall, for the purposes of disclosure of the interest in the accounts of
the Company, be finally and conclusively decided by a majority of the Board.
3.13.3 A Director shall (in the absence of some other interest than is indicated below) be entitledto vote (and be counted in the quorum) in respect of any resolution at such meeting if his
duty or interest arises only because the resolution relates to one of the following matters:(i)the giving to him of any guarantee, security or indemnity in respect of money lentor obligations incurred by him or by any other person at the request of or for the
benefit of the Company or any of its subsidiary undertakings;(ii)

the giving to a third party of any guarantee, security or indemnity in respect of adebt or obligation of the Company or any of its subsidiary undertakings for which
he himself has assumed responsibility in whole or in part, either alone or jointlywith others, under a guarantee or indemnity or by the giving of security;

76

AR Anx 1 –21.2.2

(iii) where the Company or any of its subsidiary undertakings is offering shares ordebentures or other securities in which offer the Director is or may be entitled toparticipate as a holder of securities or in the underwriting or sub-underwriting of
which the Director is to participate;(iv) relating to another company in which he or any persons connected with him has adirect or indirect interest (whether as an officer or shareholder or otherwise) provided
that he and any persons connected with him are not to his knowledge the holder(otherwise than as a nominee for the Company or any of its subsidiary undertakings)of or beneficially interested in one per cent, or more of any class of the equity sharecapital of such company (or of any third company through which his interest is
derived) or of the voting rights available to members of the relevant company (anysuch interest being deemed for the purpose of the relevant article to be a materialinterest in all circumstances);(v)

relating to an arrangement for the benefit of the employees of the Company or anyof its subsidiary undertakings which does not award him any privilege or benefit
not generally awarded to the employees to whom such arrangement relates; or(vi) concerning insurance which the Company proposes to maintain or purchase for the
benefit of Directors or for the benefit of persons including Directors.
3.13.4 Where proposals are under consideration concerning the appointments (including fixing
or varying the terms of the appointment) of two or more Directors, such proposals may
be divided and a separate resolution considered in relation to each Director. In each case,each such Director (if not otherwise debarred from voting) is entitled to vote (and be
counted in the quorum) in respect of each resolution except that resolution concerning his
own appointment.
3.14 Indemnity
3.14.1 Subject to the provisions of any relevant legislation, the Company may indemnify any
Director, alternate director and other officer of the Company (other than an auditor) against
all costs, charges, losses, expenses and liabilities incurred by him in the execution anddischarge of his duties or in relation to those duties.
3.15 Borrowing powers
3.15.1 The Board may exercise all the powers of the Company to borrow money, to guarantee, toindemnify, to mortgage or charge its undertaking, property, assets (present or future) anduncalled capital, and to issue debentures and other securities whether outright or as
collateral security for any debt, liability or obligation of the Company or of any third party.
3.16 Disclosure of interests in shares
3.16.1 Section 793 of the Companies Act provides a public company with the statutory means toascertain the persons who are, or have within the last three years been, interested in its
relevant share capital and the nature of such interests.
3.16.2 Where notice is served by the Company under section 793 of the Companies Act(“section 793 notice”) on a member, or on another person appearing to be interested inshares held by that member, and that member or other person has failed to give theCompany the information required within the period set out in the section 793 notice,certain sanctions may apply (as determined by the Board) including:(i)the member shall not be entitled to be present or vote (either in person or by proxy)at a general meeting or at a separate meeting of the holders of a class of shares oron a poll in respect of the default shares; and

77

(ii)

where the default shares represent at least 0.25 per cent. in nominal value of theissued shares of their class:•the member shall not be entitled to receive any dividend or other distribution,or shares in place of a dividend;•no transfer of the shares shall be registered except in certain specified
circumstances.

3.16.3 Subject to certain restrictions, the above sanctions shall cease to apply with effect fromthe date that the Company receives notice of an excepted transfer (but only in respect of
the shares transferred) or seven days after receipt by the Company of all the information
required in the section 793 notice.
3.16.4 The New Articles do not restrict in any way the provisions of section 794 of theCompanies Act.
4.
4.1

4.2

Share Options
Introduction
4.1.1 The Company has granted options under the Share Option Scheme, the Equity Incentive
Plan and pursuant to Unapproved Option Agreements. All these options have been granted
to directors, employees, former employees, contractors or consultants to the Group.
4.1.2

As at 16 June 2011 (being the latest practicable date before the date of this document),
options over 2,150,490 ordinary shares have been granted at exercise prices ranging from
£0.14 to £1.05. The majority of these options vest one third on the first anniversary, one
third on the second anniversary and the balance on the third anniversary of the date of grant.

4.1.3

The Board believes that the retention of senior management will be a key driver to thesuccess of the Company. Consequently, the Company intends to review its employee shareoption arrangements following Admission. It is likely that further share options will be
granted to incentivise employees. Any further share options to be granted will be underterms normally applicable to share options granted by companies quoted on AIM.

Principle Terms of the Share Option Scheme
4.2.1 Grant of options
Options may be granted to eligible employees by the Board or the Trustees of a trust
established by the Company (provided the trust together with the Share Option Scheme
constitute an Employees Share Scheme under the Companies Act 2006).
Options intended to be EMI options must meet the requirements of Schedule 5 of ITEPA
relating to Enterprise Management Incentives (“EMI”).
4.2.2

Option Conditions
An option may be granted subject to conditions set out in an option holder’s option certificate.

4.2.3

Eligibility
Any employee who is an employee of a group company and in relation to EMI options
whose committed time to group companies amounts to not less than 25 hours per weekor, if less, 75 per cent. of his working time and who does not have a material interest in
the Company, shall be eligible to participate.

4.2.4

Non-transferability of Option
An option may only be exercised by the individual option holder (or by his personal
representatives in the case of death). Any attempt to transfer or assign an option shall resultin the immediate lapse of the option.

78

AR Anx 1 –17.3
AR Anx 1 –21.1.6

4.2.5

Limit on the granting of an EMI option
An EMI option may not be granted to a qualifying employee if it would cause the aggregate
market value of his/her shares subject to all qualifying EMI options and any option granted
under a scheme approved under Schedule 4 to ITEPA 2003 to exceed £120,000.
A qualifying EMI option may not be granted if as a result of such grant the aggregate
market value of the Ordinary Shares subject to all qualifying EMI options would exceed£3,000,000 or the gross assets of the group would exceed £30 million.
Where a qualifying employee has been cumulatively granted EMI options with anaggregate market value equal to or greater than £120,000, any further options granted
within three years is to be treated as an unapproved option.

4.2.6

Exercise price
The price per share to be paid on the exercise of an option shall be determined by the
Board and is the market value of an ordinary share at the date of grant unless the Board
determines that it shall be in the interests of the Company to use a different price. The
price per ordinary share cannot be less than the nominal value where the option will besatisfied by the issue of new shares.

4.2.7

Exercise of options
Options may be exercised in whole or in part from the date specified in an option holder’s
option certificate to the tenth anniversary of the date of grant. Options may be exercised
earlier on the occurrence of certain specified events including a takeover, reconstruction
or amalgamation of the company. In certain circumstances an option holder may bepermitted to exchange his option under the Share Option Scheme for options over theshares of an acquiring company, subject to the agreement of the acquiring company.

4.2.8

Employees leaving the Company
If an option holder ceases to be a Director or employee (1) as a result of any fraudulent or
dishonest act or omission or (2) as a result of any act of gross misconduct or grossincompetence or (3) as a result of any other event that the Board resolves to be of a serious
nature and detrimental to the goodwill of the Company or (4) as a result of becoming
bankrupt, the options held by the option holder shall lapse immediately.
Where an option holder dies, his personal representatives may exercise the option, to theextent that it is capable of exercise in accordance with the conditions as set out in theoption certificate, for a period of twelve months from the date of death.
In any other circumstances, the option holder may, to the extent that the option is capableof exercise in accordance with the conditions set out in the option certificate, exercise theoption within thirty days from the date of cessation.
The Company has the discretion to increase the extent to which such an option is
exercisable and to increase the period during which the option will remain exercisable.

4.2.9

Variation of share capitalIn the event of a capitalisation issue, rights issue, sub-division or consolidation of sharesor reduction of capital or any other variation of capital or other capital reorganisation, thenumber of shares subject to an option and/or the option price may be adjusted by the Boardor the Trustees together with the Board.

4.2.10Tax indemnity
Option holders have to indemnify the Company for any income tax and employee andemployer national insurance contributions arising in respect of the grant or exercise ofan option.

794.2.11

Relationship of the scheme to contract of employment
The grant of an option does not form part of the option holder’s entitlement toremuneration or benefits pursuant to the option holder’s contract of employment. The grantof an option shall not afford any rights or additional rights to compensation or damages.
Neither the grant nor any benefit which may accrues shall form part of that option holder’spensionable remuneration for the purposes of any pension scheme.

4.3

4.2.12Administration
The Share Option Scheme shall be administered by the Board (in respect of options
granted by it) or the Trustees (in respect of options granted by the Trustees). The Board or
the Trustees (as the case may be) may make and vary such regulations as they think fit. In
the event of any dispute or disagreement the decision of the Board or the Trustees (as thecase may be) is final and binding. Where the Trustees have granted an option, they shallconsult with, and take account of the wishes of, the Board before making any
determination or exercising any power or discretion under the Share Option Scheme.

4.2.13

Alteration of the Share Option Scheme
The Board may alter the rules of the Share Option Scheme provided no alteration to therules will effect any option granted prior to the date of such alteration without the consent
of the option holders.

4.2.14

Miscellaneous
The Company shall keep available sufficient authorised but unissued Ordinary Shares toenable it to satisfy the exercise in full or all options to subscribe for shares.

Principle terms of the Equity Incentive Plan
4.3.1 Grant of options
Options may be granted by the Company to eligible employees.
4.3.2

Option conditions
Stock option agreements set out the conditions by which options shall vest and become
exercisable. Options are also subject to the Company’s 2006 Equity Incentive Plan.
All stock option agreements provide for options to vest, one third on the first anniversaryof the date of grant, one third on the second anniversary of the date of grant and the balanceon the third anniversary of the date of grant.

4.3.3

Exercise price
The price per share to be paid on the exercise of an option shall be determined by the
Board and is the fair market value of an ordinary share at the date of grant.

4.3.4

Exercise of options
Options may be exercised in whole or in part to the extent vested and up to the tenthanniversary of the date of grant. Options may be exercised earlier at the discretion of theBoard on the occurrence of certain specified events including a takeover, the sale of theassets of the Company, a reconstruction or amalgamation of the company.

4.3.5

Non-transferability of Option
An option may only be exercised by the individual option holder (or by his personal
representatives in the case of death). Any attempt to transfer or assign an option shall resultin the immediate lapse of the option.

80

4.3.6

Employees leaving the Company
If an option holder ceases to be a Director or employee (1) as a result of any fraudulent or
dishonest act or omission or (2) as a result of any act of gross misconduct or grossincompetence or (3) as a result of any other event that the Board resolves to be of a serious
nature and detrimental to the goodwill of the Company or (4) as a result of becoming
bankrupt, the options held by the option holder shall lapse immediately.
Where an option holder dies, his personal representatives may exercise the option, to theextent that it is capable of exercise in accordance with the conditions as set out in the stock
option agreement, for a period of twelve months from the date of death.
If an option holder leaves employment due to a disability, the option holder may to theextent that the option is capable of exercise in accordance with the conditions set out
in the stock option agreement, exercise the option within three months from the dateof cessation.
In any other circumstances, the option holder may, to the extent that the option is capableof exercise in accordance with the conditions set out in the stock option agreement,
exercise the option within thirty days from the date of cessation.

4.4

4.3.7

Variation of share capitalIn the event of a capitalisation issue, rights issue, sub-division or consolidation of sharesor reduction of capital or any other variation of capital or other capital reorganisation, thenumber of shares subject to an option and/or the option price may be adjusted by the Board.

4.3.8

Relationship of the scheme to contract of employment
The grant of an option does not confer upon the option holder any rights or additionalrights to continue in the employment of the Company or shall interfere with or
restrict in any way the rights of the Company to discharge the option holder with orwithout cause.

4.3.9

Administration
The Share Option Scheme shall be administered by the Board. In the event of any disputeor disagreement the decision of the Board is final and binding.

Principle terms of the Unapproved Option Agreements
4.4.1 Grant of options
Options are granted by the Board.
4.4.2

Option Conditions
Each Unapproved Option Agreement sets out all the rules relating to the Option.
All options agreements issued provide for options to vest, one third on the first anniversaryof the date of grant, one third on the second anniversary of the date of grant and the balanceon the third anniversary of the date of grant.

4.4.3

Non-transferability of Option
An option may only be exercised by the individual option holder (or by his personal
representatives in the case of death). Any attempt to transfer or assign an option shall resultin the immediate lapse of the option.

4.4.4

Exercise price
The price per share to be paid on the exercise of an option is determined by the Board.

4.4.5

Exercise of options
Options may be exercised in whole or in part to the extent the option has vested and up to
the tenth anniversary of the date of grant. Options may be exercised earlier on theoccurrence of a sale of the company.
81

4.4.6

Employees leaving the Company
If an option holder ceases to be a Director or employee (1) as a result of any fraudulent or
dishonest act or omission or (2) as a result of any act of gross misconduct or grossincompetence or (3) as a result of any other event that the Board resolves to be of a serious
nature and detrimental to the goodwill of the Company or (4) as a result of becoming
bankrupt, the options held by the option holder shall lapse immediately.
Where an option holder dies, his personal representatives may exercise the option, to theextent that it is has vested at the date of death, for a period of twelve months from the dateof death.
In any other circumstances, the option holder may, to the extent that the option is capableof exercise in accordance with the conditions set out in the option certificate, exercise theoption within thirty days from the date of cessation.

5.
5.1

4.4.7

Tax indemnity
Option holders have to indemnify the Company for any income tax and employee andemployer national insurance contributions or equivalent taxes elsewhere arising in respectof the grant or exercise of an option.

4.4.8

Alteration of Unapproved Option Agreements
The Board may amend, vary or change any of the terms of an Unapproved Option Agreement.

Significant Shareholders
As at the date of this document insofar as it is known to the Directors, the following persons (inaddition to those disclosed in paragraph 7 of this Part 4) are or will immediately following
Admission be interested in three per cent. or more of the Enlarged Issued Share Capital:

Name

Prior to Admission andprior to the issue of theAdditional Shares
Percentage
Number ofof issued
Ordinary
Ordinary
SharesShare capital

Fidelity Investments Limited
1,360,544
David Gerard Theriault
1,082,000
Amati Global Investors Limited
340,136
Newton Investment Management
0
LimitedArthur Chance643,584
Blackrock Investment Management0(UK) Limited
Timothy Cadman
596,500

AR Anx 1 –18.1

At Admission

Number of
Ordinary
SharesPercentage
of issued
Ordinary
Share capital

7.7%
6.2%
1.9%
0%

1,638,322
1,032,000
750,691
693,144

7.7%
4.8%
3.5%
3.2%

3.7%
0%

654,695
645,000

3.1%
3.0%

3.4%

476,500

2.2%

5.2

As at the date of this document and immediately following Admission, none of the Company’s
significant Shareholders have or shall have different voting rights from other Shareholders.

AR Anx 1 –
18.2

5.3

The Company is not aware of any person who, directly or indirectly, owns or controls the Company
and the Company is not aware of any arrangements the operation of which may at a subsequent
date result in a change of control of the Company.

AR Anx 1 –
18.4

82

6.
6.1

Directors
The full names and ages of the Directors of the Company are set out in paragraph 10 of Part 1 ofthis document. No Director has had a previous name.

6.2

Other than their directorships of the Company, the current directorships and partnerships of the
Directors and the directorships and partnerships held by them within the five years prior to thedate of this document are as follows:
Director

Current directorships/partnerships

Previous directorships/partnerships

Richard Terence Green

Ubisense Limited
Ubisense AG
Ubisense Inc
Ubisense SAS
Ubisense Solutions Inc

Infotech Enterprises Europe
LimitedTen Sails LLP

Gordon Michael Campbell Ubisense Limited
Ubisense AG
Ubisense Inc
Ubisense SAS
Ubisense Solutions Inc

Ten Sails LLPPeter George Harverson

Aspex Semiconductors Limited
Brady plc
Circus Mews Bath Management
Company Limited
eoSemi Limited
CRFS Limited

Ten Sails LLP

Professor Andrew(Andy) Hopper CBE

RealVNC Limited
Cambridge Computer Lab Ring
VNC Group Limited
VNC Limited

Cambridge Wireless Limited
Solarflare Communications
LimitedAdventiq Limited
Cambridge 123 Limited
Cambridge Communications
Systems Limited

Jonathan Keith Lomas

Contact Lens Precision Laboratories
Limited
Vision Partners Limited
Tissot Medical Research S.A.
Ultravision International Limited

Dr. Richard (Dick)
Gordon NewellPrion Limited
Ten Sails LLP
Contact Lens Precision Laboratories
Limited
Vision Partners Limited
Thompson Media Partners Limited
Tissot Medical Research S.A.

Dr. Robert Daniell Sansom Greater Cambridge Partnership
CRFS Limited
Moviestorm Limited
Cambridge in America (UK)
LimitedAzuro, Inc.
Fetch Technologies, Inc.
Netronome Systems, Inc.

83

Azuro (UK) Limited
Arc International Cambridge
LimitedDaniell & Sons Limited
Cambridgeshire Horizons Limited
Reciva Limited

6.3

6.4

Director

Current directorships/partnerships

Previous directorships/partnerships

Paul Ronald Taylor

Anite Plc

Aveva Solutions Limited
Cadcentre Pension Trustee
LimitedAveva Engineering IT Limited
Aveva Consulting Limited
Aveva Group Plc
Cadcentre Limited
Cadcentre Engineering IT Limited
Aveva Managed Services Limited
Aveva Limited
Tribon Solutions (UK) Limited
Aveva Inc.
Aveva GmbH
Aveva S.A.
Aveva AS
Aveva East Asia
Aveva Sendrian Berhad
Aveva AB
Aveva Information Technology
Aveva Pty
Aveva do Brasil Informática Ltda
Cadcentre Property Limited

Save as disclosed in paragraph 6.4 of this Part 4, at the date of this document, none of the
Directors has:
6.3.1

any unspent convictions in relation to indictable offences;

6.3.2

had any bankruptcy order made against him or entered into any voluntary arrangements;

6.3.3

Save as disclosed in paragraph 6.4 below, been a director of a company which has beenplaced in receivership, compulsory liquidation, creditors voluntary liquidation,
administration, been subject to a company voluntary arrangement or any composition or
arrangement with its creditors generally or any class of its creditors whilst he was a directorof the company or within the 12 months after he ceased to be a director of that company;

6.3.4

been a partner in any partnership which has been placed in compulsory liquidation,
administration or been the subject of a partnership voluntary arrangement whilst he wasa partner in that partnership or within the 12 months after he ceased to be a partner in thatpartnership;

6.3.5

been the owner of any assets or a partner in any partnership which owned any assets whichhave been placed in receivership whilst he was a partner in that partnership or within
12 months after he ceased to be a partner in that partnership;

6.3.6

been publicly criticised by any statutory or regulatory body (including recognised
professional bodies); or

6.3.7

been disqualified by a court from acting as a director of any company or from acting in
the management or conduct of affairs of a company.

As set out in the table at paragraph 6.2 above, each of Gordon Campbell, Richard Green,Peter Harverson and Dick Newell were members of Ten Sails LLP (a limited liability partnershipincorporated under number OC304383). The members of Ten Sails LLP voluntarily appointed
liquidators on 17 July 2006 and the partnership was dissolved with effect from 26 July 2007. The
dissolution of Ten Sails LLP was part of the restructing that resulted from the creation of the Group in
its current form.

84

Schedule 2
– (g)

7.
7.1

Interests of Directors
The interests of the Directors (all of which are beneficial, unless otherwise stated), and (so far as
is known to the Directors, or could with reasonable diligence be ascertained by them) the interestsof persons connected with the Directors (within the meaning of section 252 of the Act), in theissued share capital of the Company as at the date of this document and in the Enlarged Issued
Share Capital as at Admission will be as follows:

Name

Richard Terence Green
Gordon Michael CampbellPeter George Harverson
Professor Andrew Hopper CBE
Jonathan Keith Lomas
Dr. Richard Gordon Newell
Dr. Robert Daniell Sansom
Paul Ronald Taylor

Prior to Admission and prior
to the issue of the Additional Shares
Percentage
Number ofof issued
Ordinary
Ordinary
SharesShare capital

1,434,179*
76,039***59,606225,000
36,601
615,577
2,049,232
0

8.2%
0.4%
0.3%
1.3%
0.2%
3.5%
11.7%
0%

At Admission

Number of
Ordinary
SharesPercentage
of issued
Ordinary
Share capital

1,443,011**
87,987****
65,161225,000
47,712643,354
2,493,676
0

6.7%
0.4%
0.3%
1.1%
0.2%
3.0%
11.6%
0%

*
Including 111,111 Ordinary Shares held in the Richard Green Children’s Trust.
** Including 119,943 Ordinary Shares held in the Richard Green Children’s Trust.
*** Including 46,539 Ordinary Shares held by Gordon Campbell’s wife, Claire Campbell.
**** Including 58,487 Ordinary Shares held by Gordon Campbell’s wife, Claire Campbell.

7.2

In addition, the interests of the Directors in unissued Ordinary Shares under share options that havebeen granted to them, in each case for nil consideration, are:

Name

Richard Terence Green
Richard Terence Green
Gordon Michael Campbell
Gordon Michael CampbellPeter George Harverson
Professor Andrew Hopper CBE
Jonathan Keith Lomas
Dr. Richard Gordon Newell
Dr. Robert Daniell Sansom
Paul Ronald Taylor

Number of
Ordinary
Shares underoptionNumber of
Ordinary
Shares underoptions thathave vested

Exercise
priceLatest dateof exercise

76,278100,000
120,500
32,50091,333
20,27801,056
0025,426
040,167030,444
6,760
0
352
0
0

£0.14
£1.05
£0.14
£1.05
£0.14
£0.14
—
£0.14
—
—

18 March 2020
16 May 2021
18 March 2020
16 May 2021
18 March 2020
18 March 2020—
18 March 2020
—
—

85

7.3

In addition, the interests of the Directors in unissued Ordinary Shares pursuant to the Convertible
Loans are:

Name

Convertible
Loan amountoutstanding

Conversion
price perOrdinary Share

Number of
Ordinary
Shares to beissued onconversion

Richard Terence Green*
Gordon Michael Campbell**Peter George Harverson
Professor Andrew Hopper CBE
Jonathan Keith Lomas
Dr. Richard Gordon Newell
Dr. Robert Daniell Sansom
Paul Ronald Taylor£7,949£10,753.70£5,000—£10,000£25,000£400,000
—

£0.90
£0.90
£0.90
—
£0.90
£0.90
£0.90
—

8,832
11,948
5,555—
11,111
27,777444,444—*

Including a convertible loan of £7,949 held in the Richard Green Children’s Trust.

**

Including a convertible loan of £10,753.70 held by Gordon Campbell’s wife, Claire Campbell.

7.4

Save as disclosed in paragraphs 7.1, 7.2 and 7.3 above, the Directors are not aware of any interestsof persons connected with them (within the meaning of section 252 of the 2006 Act).

7.5

There are no outstanding loans granted by the Company to any Director, nor are there any
guarantees provided by the Company for their benefit.

7.6

No Director or any member of his family has a related financial product referenced to theOrdinary Shares.

8.
8.1

Directors’ Service Contracts and Letters of Appointment
Richard Green was appointed a director of the Company on 10 November 2005. Ubisense Limited
entered into a new service agreement with Richard Green on 10 February 2011. This sets out theterms of his appointment as Chief Executive Officer. Under the agreement, Richard Green is
entitled to a salary of £125,000 per annum and a bonus, which is subject to the achievement offinancial targets and is not guaranteed. Either party may terminate the agreement on six months’
notice. The agreement restricts Richard Green from being engaged in or making a material
investment in any other business (including competitors). There are also provisions which, in theevent of termination, restrict Richard Green from engaging in or having an interest in a competitor
and restrict him from soliciting or dealing with the Group’s customers (and prospective customers);
interfering with the Group’s suppliers, distributors, licensees and licensors; and poaching key
employees of the Group. Each of these restrictions apply for a period of six months following thetermination of employment. The agreement contains strong provisions protecting the Group’s
confidential information and intellectual property.

8.2

Gordon Campbell was appointed a director of the Company on 9 September 2010. Ubisense
Limited entered into a new service agreement with Gordon Campbell on 14 February 2011. Thisset out the terms of his appointment as Chief Financial Officer. Under the agreement, Gordon
Campbell is entitled to a salary of £95,000 per annum and a bonus, which is subject to theachievement of financial targets and is not guaranteed. Either party may terminate the agreement
on six months’ notice. The agreement restricts Gordon Campbell from being engaged in or making
a material investment in any other business (including competitors). There are also provisions
which, in the event of termination, restrict Gordon Campbell from engaging in or having an interestin a competitor and restrict him from soliciting or dealing with the Group’s customers (andprospective customers); interfering with the Group’s suppliers, distributors, licensees and licensors;and poaching key employees of the Group. Each of these restrictions apply for a period of
six months following the termination of employment. The agreement contains strong provisions
protecting the Group’s confidential information and intellectual property.

86

AR Anx 1 –17.2;
AR Anx 1 –21.1.6
AR Anx 1 –19
AR Sch 2 –(i)

AR Anx 1 –16.1
AR Anx 1 –16.2
Schedule
2 (g)

8.3

Professor Hopper was appointed a director of the Company on 10 November 2005. The Company
entered into a letter of appointment with Professor Hopper on 18 May 2011. This letter of
appointment sets out the terms of Professor Hopper’s appointment as non-executive Chairman.
Professor Hopper was appointed for an initial period of three years save that either party may
terminate the appointment on one months’ notice. Under the letter of appointment, Professor
Hopper is entitled to an annual fee of £15,000 and reimbursement of reasonable expenses but noother remuneration. There are provisions which restrict the disclosure of the Group’s confidential
information.

8.4

Keith Lomas was appointed a director of the Company on 19 December 2008. The Company
entered into a letter of appointment with Keith Lomas on 18 May 2011. This letter of appointment
sets out the terms of Keith Lomas’ appointment as a non-executive director. Keith Lomas wasappointed for an initial period of three years save that either party may terminate the appointment
on one months’ notice. Under the letter of appointment, Keith Lomas is entitled to an annual feeof £6,000 and reimbursement of reasonable expenses but no other remuneration. There areprovisions which restrict the disclosure of the Group’s confidential information.

8.5

Dr Sansom was appointed a director of the Company on 16 December 2005. The Company enteredinto a letter of appointment with Dr Sansom on 18 May 2011. This letter of appointment sets out
the terms of Dr Sansom’s appointment as a non-executive director. Dr Sansom was appointed for
an initial period of three years save that either party may terminate the appointment on one months’
notice. Under the letter of appointment, Dr Sansom does not currently draw a fee but he is entitled
to reimbursement of reasonable expenses but no other remuneration. There are provisions which
restrict the disclosure of the Group’s confidential information.

8.6

Dick Newell was appointed a director of the Company on 16 December 2005. The Company enteredinto a letter of appointment with Dick Newell on 18 May 2011. This letter of appointment sets out
the terms of Dick Newell’s appointment as a non-executive director. Dick Newell was appointed for
an initial period of three years save that either party may terminate the appointment on one months’
notice. Under the letter of appointment, Dick Newell is entitled to an annual fee of £3,000 (although
this has been waived at present) and reimbursement of reasonable expenses but no other
remuneration. There are provisions which restrict the disclosure of the Group’s confidential
information.

8.7

Peter Harverson was appointed a director of the Company on 10 November 2005. The Company
entered into a letter of appointment with Peter Harverson on 20 April 2011. This letter of
appointment sets out the terms of Peter Harverson’s appointment as a non-executive director. Peter
Harverson was appointed for an initial period of three years save that either party may terminate
the appointment on one months’ notice. Under the letter of appointment, Peter Harverson is entitledto an annual fee of £15,600 and reimbursement of reasonable expenses but no other remuneration.
There are provisions which restrict the disclosure of the Group’s confidential information.

8.8

The Company entered into a letter of appointment with Paul Taylor on 15 February 2011 andPaul Taylor was appointed as a director of the Company with effect from 28 February 2011. The
letter of appointment sets out the terms of Paul Taylor’s appointment as a non-executive director.
Paul Taylor was appointed for an initial period of three years save that either party may terminate
the appointment on one months’ notice. Under the letter of appointment, Paul Taylor is entitled toan annual fee of £15,000 and reimbursement of reasonable expenses but no other remuneration.
There are provisions which restrict the disclosure of the Group’s confidential information.

8.9

There are no Directors’ service agreements or contracts for services entered into by Ubisense
Limited or the Company which expire or are terminable with more than twelve months’ notice.

8.10 Other than as disclosed in this document, there is no service contract, or contract in the nature ofservices, between any Director and the Company.

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8.11 Other than disclosed in the Admission Document, none of the service contracts, letters of
appointment or contracts of employment of any of the members of the Company’s administrative,
management or supervisory bodies provide for benefits upon termination of employment, otherthan notice.
9.
9.1

Corporate Governance
The Directors support high standards of corporate governance. As an unquoted company, as at thedate of this document the Company has not been required to, nor has it fully complied with, theprovisions of the UK Corporate Governance Code. Although compliance with the UK Corporate
Governance Code is not compulsory for AIM companies, the Directors intend to apply the principles
as far as practicable and appropriate for a public company of the Company’s nature and size.

9.2

As envisaged by the UK Corporate Governance Code the Company has established threecommittees: an audit committee, a remuneration committee and a nomination committee detailsof which are set out below.

9.3

The Company has a single independent director, being Paul Taylor.

9.4

The UK Corporate Governance Code recommends that a formal induction process should be put
in place for new directors. The Company currently has an informal procedure in place which is
described in paragraph 9.8.4 of this Part 4.

9.5

The UK Corporate Governance Code recommends that the board should undertake a formal
rigorous annual evaluation of its own performance and that of its committees and individual
directors. This is not currently the case, but going forward it is intended that this will be the caseand the Company’s annual report will state how the performance evaluation of the board, itscommittees and its individual directors has been conducted each year. The non-executive directors
also intend to separately evaluate the performance of the executive directors.

9.6

There is currently no formal re-election process in place for board members as recommended by
the UK Corporate Governance Code although the New Articles contain provisions that require one
third of the directors to retire by rotation.

9.7

The Company has whistleblowing arrangements in place, as recommended by the UK Corporate
Governance Code.

9.8

Board
9.8.1 The Board currently comprises two executive and six non-executive Directors and reflects
a blend of different experience and backgrounds. The roles of Chairman (which is a
non-executive position) and Chief Executive have been split by the Board for several years
and there is a clear division of responsibility between the two.
9.8.2

The Board is collectively responsible for promoting the success of the Company bydirecting and supervising its affairs and the Board’s role is to provide entrepreneurial
leadership of the Company.

9.8.3

There are a number of matters reserved specifically for decision by the Board and theseinclude:(i)reviewing operating and financial performance;(ii)

ensuring that appropriate management development and succession plans are inplace;(iii) determination of corporate strategy, including consideration and approval of theCompany’s annual strategy review;(iv) establishment of dividend policy;(v)

approval and acceptance of all new committed funding facilities;
88

AR Anx 1 –16.4

(vi) approval and acceptance of major changes in the capital structure of the Company;(vii) reviewing and approving formal treasury policies relating to funding, liquidity,transactional foreign exchange and interest rate risk management;(viii) reviewing the health and safety and environmental performance of the Company;(ix) approval of corporate acquisitions, mergers, divestments, joint ventures and major
capital expenditure; and
(x)

9.9

receiving, reviewing and approving recommendations by the designated committee
on matters related to Audit, Nominations and Remuneration.

9.8.4

Upon appointment, Directors undertake an informal induction process involving, amongst
other things, familiarisation with the Company’s strategy, culture, financial position andbusiness operations (including visits to the Company’s principal subsidiaries) and formal
training as required. Any further individual training requirements are provided as necessary
and the Directors continually update and refresh their skills and knowledge.

9.8.5

The Company Secretary is tasked with ensuring that Board procedures are followed and thatapplicable rules and regulations are complied with. In addition, Directors may, in furtheranceof the execution of their duties, take independent professional advice, if necessary at theCompany’s expense.

9.8.6

The Board normally has at least 10 scheduled meetings a year and, as detailed above, hasagreed a schedule of matters specifically reserved to it for decision. Briefing papers on
items for consideration are circulated to each Director two days prior to a Board Meeting.
The non-executive Directors meet regularly throughout the year without the Executive
Directors present.

Committee details
Audit Committee
9.9.1
Summary
The audit committee of the Company is tasked with considering how the Board should
apply the financial reporting and internal control principles of the Company, andmaintaining an appropriate relationship with the Company’s auditors.
9.9.2

Membership
The Audit Committee is appointed by the Board, on the recommendation of theNomination Committee.
The Audit Committee must be made up of only non-executive Directors and comprise atleast two members.
As at the date of this document, the Audit Committee comprises 3 non-executive Directorsof the Company and an observer. The members are:(i)Paul Taylor (chairman)(ii)

Keith Lomas(iii) Dick Newell(iv) Andy Hopper (observer)
Appointments to the Audit Committee shall be for a period of up to three years, which
may be extended for two further three year periods.
No person other than the members of the Audit Committee is entitled to be present atmeetings but others may be invited to attend by the Audit Committee.

89

The external auditors usually attend meetings of the Audit Committee. At each meeting,there is an opportunity for the external auditors to discuss matters with the Audit Committee
without any executive management being present. It is intended that the Audit Committee
has independent access to the external auditors and the external auditors have direct accessto the Chairman of the Audit Committee outside formal Audit Committee meetings.
9.9.3

Meetings
The quorum for the transaction of business of the Audit Committee shall be two memberspresent in person.
The Audit Committee meets at least 4 times a year, including meetings before the annual
and half year results announcements and at the planning stage of the annual external
audit process.

9.9.4

Decision making
Each member of the Audit Committee shall have one vote which may be cast on mattersconsidered at the meeting. Votes can only be cast by members attending a meeting of the
Audit Committee.
If a matter that is considered by the Audit Committee is one where a member of theCommittee, either directly or indirectly has a personal interest, that member shall not be
permitted to vote at the meeting.
Save where he has a personal interest, the Chairman shall have a casting vote.
All decisions of the Audit Committee shall be formally reported to the Board by the
Chairman. The Audit Committee shall make whatever recommendations to the Board it
deems appropriate on any area within its remit where action or improvement is needed
and shall compile a report on its activities to be included in the Company’s annual report.

9.9.5

Function and Duties
Amongst other things, the Audit Committee monitors the integrity of the financial
statements of the Company, and reviews summary financial statements and any financial
information contained in certain other documents, such as announcements of aprice-sensitive nature.
In particular, the Audit Committee reviews and challenges, where necessary:(i)whether the Company has followed appropriate accounting standards and madeappropriate estimates and judgements, taking into account the views of theexternal auditor;(ii)

the clarity of disclosure in the Company’s financial reports and the context in whichstatements are made; and(iii) all material information presented with the financial statements, such as theoperating and financial review and the corporate governance statement (insofar as
it relates to the audit and risk management);
Unless expressly addressed by a separate Board risk committee composed of independent
Directors, or by the Board itself, the Audit Committee reviews the adequacy andeffectiveness of the Company’s internal financial controls and internal control and risk
management systems, and reviews and approves the statements to be included in the
Company’s annual report concerning internal controls and risk management;.
The Audit Committee also reviews the adequacy and security of the Company’s
arrangements for its employees and contractors to raise concerns, in confidence, about
possible wrongdoing in financial reporting or other matters.

90

Internally, the Audit Committee monitors and reviews the effectiveness of the Company’s
internal audit function in the context of the Company’s overall risk management system
and approves the appointment and removal of the head of the internal audit function.
Externally, the Audit Committee considers and makes recommendations to the Board, for
it to put to the shareholders for their approval at the Company’s annual general meeting,in relation to the appointment, re-appointment and removal of the Company’s external
auditor. The Audit Committee oversees the selection process for new auditors and, if anauditor resigns, the Audit Committee shall investigate the issues leading to this and decide
whether any action is required.
At the same time, the Audit Committee oversees the relationship with the Company’s
external auditor, including (but not limited to) approving their remuneration and theirterms of engagement.
Remuneration Committee
9.9.6
Summary
The Company’s Remuneration Committee ensures that the executive Directors are fairly
rewarded for their individual contributions to the overall performance of the Company
and determines all elements of the remuneration of the executive Directors. By theappointment of the Remuneration Committee, the Company demonstrates to its
shareholders that the remuneration of the executive Directors is set by a Board committee,
whose members have no personal interest in the outcome of such committee’s decision
and who will have appropriate regard to the interests of those shareholders.
9.9.7

Membership
The members of the Remuneration Committee shall be appointed by the Board from amongst
the non-executive Directors, on the recommendation of the Nomination Committee. The
Remuneration Committee must have at least two members.
The chairman of the Remuneration Committee shall be appointed by the Board, on therecommendation of the Nomination Committee. The Board shall determine how long thechairman should hold office.
As at the date of this document, the Remuneration Committee comprises 4 non-executive
Directors of the Company and an observer. The members are:(i)Peter Harverson (chairman)(ii)

Keith Lomas(iii) Robert Sansom(iv) Paul Taylor(v)

Andy Hopper (observer)

The Chairman of the Committee is appointed by the Board.
Appointments to the Remuneration Committee shall be for a period of up to three years,
which may be extended for two further three year periods.
9.9.8

Meetings
The quorum for the transaction of business of the Remuneration Committee shall be two
members present in person.
The Remuneration Committee shall meet at least twice a year and otherwise as required.

91

9.9.9Decision making
Each member of the Remuneration Committee shall have one vote which may be cast on
matters considered at the meeting. Votes can only be cast by members attending a meetingof the Remuneration Committee.
If a matter that is considered by the Remuneration Committee is one where a member of
the Committee, either directly or indirectly, has a personal interest, then that member shallnot be permitted to vote at the meeting.
Save where he has a personal interest, the Chairman shall have a casting vote.
All decisions of the Remuneration Committee shall be formally reported to the Board by the
Chairman. The Remuneration Committee shall make whatever recommendations to the Board
it deems appropriate on any area within its remit where action or improvement is needed andshall compile a report on its activities to be included in the Company’s annual report.

9.9.10Role
The duties of the Remuneration Committee are to, amongst other things:(i)determine and agree with the Board the framework or broad policy for the
remuneration of the chairman of the Board, the Company’s chief executive, theexecutive Directors, the company secretary and such other members of the executive
management as it is designated to consider. No Director or manager shall be involvedin any decisions as to their own remuneration;(ii)

in determining such policy, take into account all factors which the Remuneration
Committee deems necessary, including relevant legal and regulatory requirements,
the provisions and recommendations of the UK Corporate Governance Code andthe AIM Rules for Companies and associated guidance;(iii) when settling remuneration policy for Directors, review and have regard to the
remuneration trends across the Company and the group;(iv) review the ongoing appropriateness and relevance of the remuneration policy;(v)

within the terms of the agreed policy and in consultation with the chairman and/or
chief executive, as appropriate, determine the total individual remuneration packageof the chairman of the Board, each executive Director, company secretary and otherdesignated senior executives including bonuses, incentive payments and shareoptions and other share awards;(vi) approve the design of, and determine targets for, any performance-related pay
schemes operated by the Company and approve the total annual payments madeunder such schemes;(vii) review the design of all share incentive plans for approval by the Board andshareholders;(viii) oversee any major changes in employee benefits structures throughout the Company
and the group;(ix) make whatever recommendations to the Board it deems appropriate on any area
within its remit, where action or improvement is needed; and(x)make a statement in the Company’s annual report on the Company’s remuneration
policy and practices.

The Committee is authorised by the Board to:(i)investigate any activity within its terms of reference;

92

(ii)

seek any information it requires from any employee of the Company, in order toperform its duties;(iii) within any budgetary restraints imposed by the Board, to obtain, at the Company’s
expense, outside legal or other independent professional advice on any matter within
its terms of reference; and(iv) within any budgetary restraints imposed by the Board, to appoint, at the Company’s
expense, remuneration consultants and to commission or purchase any relevant
reports, surveys or information which it deems necessary to help fulfil its duties.
Nomination Committee
9.9.11 Summary
The function of the Nomination Committee is to provide a formal, rigorous and transparent
procedure for the appointment of new Directors to the Board. Although the Nomination
Committee makes recommendations to the Board, nominations to the Board are ultimately
considered by the Board as a whole.
9.9.12

Membership
The members of the Nomination Committee shall be appointed by the Board from amongst
the non-executive Directors. The Nomination Committee must have at least two members.
As at the date of this document, the Nomination Committee comprises 4 non-executive
Directors of the Company. The members are:(i)

Robert Sansom (chairman)(ii)Peter Harverson(iii) Dick Newell(iv) Andy Hopper
Appointments to the Nomination Committee shall be for a period of up to three years,
which may be extended for two further three year periods.
9.9.13

Meetings
The quorum for the transaction of business of the Nomination Committee shall be
two members present in person.
The Nomination Committee shall meet at least twice a year and otherwise as required.
The Nomination Committee may invite any person it thinks appropriate to join themembers of the Nomination Committee at its meetings.

9.9.14

Decision making
Each member of the Nomination Committee shall have one vote which may be cast on
matters considered at the meeting. Votes can only be cast by members attending a meetingof the Nomination Committee.
If a matter that is considered by the Nomination Committee is one where a member of theCommittee, either directly or indirectly has a personal interest, that member shall not be
permitted to vote at the meeting.
Save where he has a personal interest, the Chairman shall have a casting vote.
All decisions of the Nomination Committee shall be formally reported to the Board by the
Chairman. The Nomination Committee shall make whatever recommendations to the Board
it deems appropriate on any area within its remit where action or improvement is needed
and shall compile a report on its activities to be included in the Company’s annual report.

93

9.9.15

Role
Amongst other things, the Nomination Committee shall:(i)regularly review the structure, size and composition (including the skills, knowledge,
experience and diversity) of the Board, compared to its current position and makerecommendations to the Board with regard to any changes;(ii)

give full consideration to succession planning for Directors and other senior executives
in the course of its work, taking into account the challenges and opportunities facing
the Company, and the skills and expertise needed on the Board in the future;(iii) be responsible for identifying and nominating for the approval of the Board,candidates to fill Board vacancies as and when they arise;(iv) review the results of the Board performance evaluation process that relate to thecomposition of the Board;(v)

keep under review the leadership needs of the Company, both executive and nonexecutive, with a view to ensuring the continued ability of the group to compete
effectively in the marketplace;(vi) review annually the time required from non-executive Directors and performance
evaluation should be used to assess whether the non-executive Directors are spending
enough time to fulfil their duties;(vii) make whatever recommendations to the Board it deems appropriate on any area
within its remit, where action or improvement is needed;(viii) make a statement in the Company’s annual report about the activities of theNomination Committee; and(ix) consider such other matters as may be requested by the Board.
The Nomination Committee shall be responsible for making recommendations to theBoard concerning:(i)formulating plans for succession for both executive and non-executive Directors and,in particular, for the key roles of chairman of the Board and chief executive;(ii)

suitable candidates for the role of senior independent Director;(iii) membership of the audit and remuneration committees of the Company, and anyother Board committees as appropriate, in consultation with the chairmen of thosecommittees;(iv) the appointment of any Director to executive or other office.
The Nomination Committee shall report annually on the Board’s behalf to the Company’s
shareholders. Its report shall accompany the Directors’ report in the Company’s annual
report and accounts. The Nomination Committee’s report will include information about
its activities, the process used to make appointments and explain if external advice or open
advertising has not been used.
9.10 Share Dealing Code
The Company has adopted and will operate a share dealing code for Directors and applicable
employees in order to ensure compliance with Rule 21 of the AIM Rules and will take proper steps
to ensure compliance by the Directors and those employees.
9.11 Anti-Corruption and Bribery Policy
The Company has adopted and will operate an Anti-Corruption and Bribery Policy for Directors
and all employees in order to ensure compliance with anti-corruption and bribery law (inparticular, the Bribery Act 2010) and will take proper steps to ensure compliance by the Directors
and those employees.
9410. Material Contracts
10.1 The following contracts, not being contracts entered into in the ordinary course of business, havebeen entered into by the Company or its subsidiaries and are or may be material or may contain aprovision under which a member of the Group has an obligation or entitlement which is material to
the Group as at the date of this document.
Placing Agreement
10.2 Pursuant to a placing agreement dated 16 June 2011 between the Company, the Directors andCanaccord Genuity, Canaccord Genuity has agreed, subject to certain conditions, to use allreasonable endeavours to procure subscribers for the New Placing Shares.
10.3 The Placing Agreement is conditional upon, amongst other things, Admission taking place on or
before 22 June 2011 or such later date as Canaccord Genuity and the Company may agree (but inany event not later than 31 December 2011) and the Placing Agreement having become
unconditional in all respects and not having been terminated in accordance with its terms.
10.4 Subject to the terms and conditions of the Placing Agreement, the Company will pay to Canaccord
Genuity a corporate finance fee of £175,000 (exclusive of VAT) and a commission based on apercentage of the aggregate proceeds from the issue of the New Placing Shares. The Placing
Agreement also provides for the payment by the Company to Canaccord Genuity of a performancefee based on a percentage of the aggregate proceeds of the Placing (which shall be payable at
Admission and at the Company’s discretion) and the payment of a break fee in the event that
Admission has not taken place by 31 December 2011. The Placing Agreement provides for theCompany to pay all expenses of and incidental to the Placing of the Placing Shares and theapplication for Admission, including the fees and costs of other professional advisers, all costs
relating to the Placing of the Placing Shares, including printing and distribution charges, the feesof the Registrars and the fees payable to the London Stock Exchange.
10.5 The Placing Agreement contains certain customary warranties given by the Company and the Directors
in favour of Canaccord Genuity as to, amongst other things, the accuracy of information contained inthis document and a customary indemnity from the Company in favour of Canaccord Genuity.
10.6 Canaccord Genuity may terminate the Placing Agreement prior to Admission in certain specificcircumstances customary in the context of a placing and admission to AIM.
2010 Placing Agreement
10.7 Pursuant to the terms of a placing agreement dated 8 November 2010 between the Company, theDirectors and Canaccord Genuity (the “2010 Placing Agreement”), Canaccord Genuity procured
subscribers for 2,380,951 Ordinary Shares at a price of 147 pence per Ordinary Shares raisinggross proceeds of £3.5 million for the Company. Under the terms of the 2010 Placing Agreement,
the Company paid Canaccord Genuity a corporate finance fee of £30,000 (exclusive of VAT) anda commission based on a percentage of the aggregate proceeds from the issue of such Ordinary
Shares. The 2010 Placing Agreement contained customary warranties given by the Company andthe Directors in favour of Canaccord Genuity and a customary indemnity from the Company infavour of Canaccord Genuity.
Nominated Adviser and Broker Agreement
10.8 Pursuant to an agreement dated 16 June 2011 made between the Company, the Directors andCanaccord Genuity, Canaccord Genuity has agreed to act as nominated adviser and broker to theCompany following Admission as required by the AIM Rules.
10.9 Under the terms of the Nominated Adviser and Broker Agreement, Canaccord Genuity shallprovide, amongst other things:
10.9.1 advice to the Company and Directors in relation to matters concerning the London Stock
Exchange and the AIM Rules; and10.9.2 advice to the Company and Directors on all other matters relevant to a company whose
shares are admitted to trading on AIM.
95

AR Anx 1 –22

10.10 Under the Nominated Advisor and Broker Agreement, the Company has agreed to pay Canaccord
Genuity a retainer fee as well as payment of any out-of-pocket expenses reasonably incurred by
Canaccord Genuity in connection with the performance of its services under the Nominated Adviser
and Broker Agreement.
10.11 After an initial fixed term of 12 months from the date upon which the Placing Agreement becomes
unconditional in accordance with its terms, the Nominated Adviser and Broker Agreement isterminable on three months’ notice given by either Canaccord Genuity or the Company. The
Nominated Adviser and Broker Agreement contains provisions for early termination in certain
circumstances and also a customary indemnity given by the Company to Canaccord Genuity inrelation to the provision by Canaccord Genuity of its services under the Nominated Advisor andBroker Agreement.
Canaccord Warrant Agreement
10.12 Pursuant to the terms of Canaccord Genuity’s engagement with the Company and to the terms ofa warrant instrument dated 16 June 2011, the Company has agreed to issue, on Admission, toCanaccord Genuity warrants equal to 0.5 per cent. of the Enlarged Share Capital (“Canaccord
Warrant”). Each warrant issued shall entitle the holder to acquire one Ordinary Share at the
Placing Price.
Lock-in Arrangements
10.13 Each of the Directors, who will, following Admission, hold in aggregate 5,005,901 Ordinary Shares(representing 23.4 per cent. of the Enlarged Share Capital), have severally undertaken that (subject tocertain exceptions set out in the deeds relating to these lock-in arrangements) they will not and willprocure that none of their Associates will, without the prior written consent of the Company andCanaccord Genuity, for a period of 12 months from Admission, dispose of, directly or indirectly, any
Ordinary Shares or any options or other rights of whatsoever nature, to subscribe for, or convert or
exchange any securities into, or otherwise acquire, any Ordinary Shares.
Facility Agreement
10.14 Ubisense Limited entered into a facility agreement with HSBC Bank Plc on 22 February 2008 pursuant
to which HSBC Bank plc, as lender, has made available to the Group a facility of up to £2,000,000.
The facility is expressed to be for working capital purposes and is on generally standard terms for aloan agreement of this type. The amount from time to time outstanding under the facility is guaranteedby each member of the Group and is secured under the terms of the following security documents:
10.14.1 Guarantee to HSBC Bank plc given by the Company, Ubisense Limited, Ubisense Inc andUbisense AG.
The Guarantee is a composite guarantee in HSBC Bank plc’s standard form entered intoby the Company, Ubisense Limited, Ubisense Inc and Ubisense AG dated 14 March 2008
with each company guaranteeing the obligations of all of the other companies.
10.14.2 Debentures granted by Ubisense Limited and the Company in favour of HSBC Bank plc.
Both Ubisense Limited and the Company have entered into debentures in the Bank’s
standard form to secure all monies which they owe to HSBC Bank plc.
10.14.3 Security agreement granted by Ubisense Inc in favour of HSBC Bank plc.
The security agreement was entered into by Ubisense Inc and HSBC Bank plc on
22 February 2008. The security agreement is governed under the laws of Delaware in the
United States. The agreement provides that the Bank shall have security over the assets ofUbisense Inc for the payment of its obligations pursuant to the guarantee.
10.14.4 Global assignment agreement granted by Ubisense AG in favour of HSBC Bank plc.
The global assignment agreement was made between Ubisense AG and HSBC Bank plc
on 17 March 2008. The agreement is governed by German law.
96

Warrant Agreement
10.15 At the same time as entering into the Facility Agreement referred to above, HSBC Bank plc
and the Company entered into a warrant agreement pursuant to which the Company granted
HSBC Bank plc certain rights to be issued with warrants to subscribe for Ordinary Shares uponeach drawdown by the Group pursuant to the Facility Agreement.
10.16 On 16 May 2011, the Company issued warrants over 115,350 Ordinary Shares to HSBC Bank plc
pursuant to the terms of the Warrant Agreement (“Warrants”).
10.17 In consequence of Admission, the Company has agreed with HSBC Bank plc that HSBC Bank plc
will exercise the Warrants immediately prior to Admission and therefore, on Admission, theCompany will issue 115,350 Ordinary Shares to HSBC Bank plc. HSBC Bank plc has indicatedthat it intends to sell these shares on Admission.
10.18 No further draw down is permissible under the terms of the Facility Agreement and accordingly
HSBC Bank plc shall have no further right to be issued with Warrants to subscribe for Ordinary
shares as a result of, or in connection with, the Facility Agreement.
11. Selling Shareholders
11.1 The names and business addresses and the nature of any position or office or other material
relationship with the Group held by a Selling Shareholder within the last three years is set out
below together with the number of Selling Shares attributable to such Selling Shareholder.
a.

Peter Batty of Ubisense Inc. 5445 DTC Parkway, Suite #1110, Greenwood Village,
CO 80111, USA was a founder of Ten Sails. Having left to pursue other interests, Peter
returned to Ubisense in January 2010 as Vice President of Geospatial technology.

b.

Jonathan Bresler of Ubisense Inc. 5445 DTC Parkway, #1110 Greenwood Village,
CO 80111, USA has been a Senior Consultant with Ubisense since 2003 and has provided
GIS solutions to utility clients during his consultancy.

c.

Timothy Cadman of 119 Old Still Road, Sapphire, NC, 28774, USA has had no relationshipwith the Company in the last three years.

d.

Martin Cartwright of 71 Storeys Way, Cambridge, CB3 0DR was the former Finance Directorof Ubisense. He left the Group in 2009 and has no further relationship with the Group.

e.

Edgar Cooper of Ubisense Inc. 5445 DTC Parkway, #1110 Greenwood Village, CO 80111,
USA, has been an employee of Ubisense since 2003.

f.

Rupert Curwen of Ubisense Limited, St. Andrew’s House, 90 St. Andrew’s Road, Chesterton,
Cambridge, CD4 1DL was one of the founders of Ubisense and has been an employee of
the Company since its establishment.

g.

Peter Joseph Steggles of Ubisense Limited, St. Andrew’s House, 90 St. Andrew’s Road,
Chesterton, Cambridge, CD4 1DL was one of the founders of Ubisense and has been an
employee of the Company since its establishment.

h.

Nicola Terry of 130 Chesterton Road, Cambridge, CB4 1DA has had no relationship with
the Company in the last three years.

i.

David Theriault of 303 Beaux Arts Building, 10-18 Manor Gardens, London was one of thefounders of Ten Sails and is still an employee of the Group.

j.

Andrew Ward of Ubisense Limited, St. Andrew’s House, 90 St. Andrew’s Road, Chesterton,
Cambridge, CD4 1DL was one of the founders of Ubisense and has been an employee of
the Company since its establishment.

k.

Paul Webster of Ubisense Limited, St. Andrew’s House, 90 St. Andrew’s Road, Chesterton,
Cambridge, CD4 1DL was one of the founders of Ubisense and has been an employee ofthe company since its establishment.
97

l.

HSBC Bank plc of 8 Canada Square, London, E14 5HQ has been the Company’s bankers
since February 2008.

m.

Octopus Investments Limited of 20 Old Bailey, London, EC4M 7AN has been a shareholderof the Company since November 2010 and has no other relationship with the Company.
Number of
Ordinary Shares
held prior
to Admission
but following
the issue of theAdditional Shares

Shareholder% of total
Ordinary Shares
held prior
to Admission
Number ofbut following
Selling
the issue of
Shareholder
the Additional
SharesSharesPeter Batty
Jonathan Bresler
Timothy Cadman
Martin Cartwright
Edgar Cooper
Rupert CurwenPeter Steggles
Nicola TerryDavid Theriault
Andrew WardPaul Webster
HSBC Bank plc
Octopus Investments Limited

518,500
294,500
596,500
493,555
310,503
397,000
397,000
247,519
1,082,000
397,000
432,500
115,350
340,136

200,000
49,000120,000
400,000
310,503
119,100
100,000
22,00050,000119,000
95,000115,350
340,136

Total

5,259,194

2,040,089

38.6%
16.6%
50.0%
81.0%
100.0%
30.0%
25.2%
8.9%
4.6%
30.0%
22.0%
100.0%
100.0%

12. Related Party Transactions
12.1 There are no related party transactions that the Company or any subsidiary undertaking has enteredinto during the period covered by the historical financial information set out in Part 3 and up to
the date of this document.

AR Anx 1 –19

13. Investments
13.1 During the period covered by the historical financial information, the Company did not make any
investments. There are also no investments made, being made by the Company or to be made in
the future in respect of which firm commitments have been made.

AR Anx 1 –5.2

14. Employees
14.1 The number of employees of the Group at the end of each of the last three financial years ended
31 December 2008, 31 December 2009 and 31 December 2010 and on 16 June 2011 (being thelatest practicable date prior to the publication of this document) was as follows:
31 December
2008

31 December
2009

31 December
2010

16 June2011

Activity
Research andDevelopment
Sales and Marketing
Administration
Delivery/consultants

8
19
7
46

10
16
8
53

14
22
9
68

14
26
9
80

TOTAL

80

87

113

129

98

AR Anx 1 –17.1

14.2 During the financial year ended 31 December 2010 (being the most recent full financial year of
the Company) the Company employed 42.5 temporary employees on average.

AR Anx 1 –17.1

15. United Kingdom Taxation
15.1 General
15.1.1 The following summary, which is intended as a general guide only, outlines certain aspectsof current UK tax legislation, and what is understood to be the current practice of
HM Revenue & Customs in the United Kingdom regarding the ownership and disposal of
Ordinary Shares and does not constitute tax advice. Levels and bases of taxation, along withcurrent UK tax legislation and current HM Revenue & Customs practice are subject tochange, possibly with retrospective or retroactive effect. Notably the Finance Act 2011, which
will be enacted later in 2011 (upon receipt of Royal Assent which is, at the date of thisdocument, expected to be around July – August 2011) may include provisions which
ultimately impact the treatment set out in this section. Shareholders and potential investors
should be aware that future legislative, administrative or judicial changes could affect the
tax consequences outlined below.

AR Anx 3 –4.11

15.1.2 This summary is not a complete and exhaustive analysis of all the potential UK tax
consequences for holders of Ordinary Shares of the Company. It addresses certain limited
aspects of the UK tax position of UK resident, ordinarily resident and domiciled
Shareholders who are absolute beneficial owners of their Ordinary Shares and who holdtheir Ordinary Shares as an investment (other than through an Individual Savings Account).
This summary does not address the tax position of certain Shareholders who may besubject to special rules, such as dealers in securities, market makers, brokers,
intermediaries, collective investment schemes, pension funds, insurance companies or any
persons whose Ordinary Shares are “employment-related securities” (within the meaningof section 421B of the Income Tax (Earnings and Pensions) Act 2003).
15.1.3 Any Shareholder or potential investor who is in any doubt about their tax position, or who
is subject to tax in a jurisdiction other than the UK, is strongly recommended to consult
their own professional adviser immediately.
15.2 UK Tax on Capital Gains
15.2.1 A disposal (or deemed disposal) of Ordinary Shares by a Shareholder who is resident or,in the case of an individual, ordinarily resident for tax purposes in the UK, will in generalbe subject to UK taxation on capital gains.
15.2.2 A Shareholder who is neither resident nor, in the case of an individual, ordinarily resident
in the UK for tax purposes, but who carries on a trade, profession or vocation in the UK
through a permanent establishment, branch or agency and has used, held or acquired theOrdinary Shares for the purposes of such trade, profession or vocation or such permanentestablishment, branch or agency will be subject to UK tax on capital gains on the disposal(or deemed disposal) of those Ordinary Shares.
15.2.3 In addition, any holders of Ordinary Shares who are individuals and who dispose of thoseOrdinary Shares while they are temporarily resident outside the UK may be treated as
disposing of them in the tax year in which they again become tax resident in the UK.
15.2.4 For UK individuals and trustees, capital gains are chargeable at a flat rate of 18 per cent.
and/or 28 per cent. depending on the individual’s total taxable income and gains, subject
to certain reliefs and exemptions (if applicable). For UK corporate Shareholders any gain
would be taxed at the applicable rate of corporation tax for that Shareholder in theaccounting period in which the disposal (or deemed disposal) occurs depending on theircircumstances and subject to any reliefs available. Indexation may apply to reduce any
such gain (though indexation is no longer available to individuals or trustees).

9915.3 UK Taxation of Dividends
15.3.1 Under current UK tax legislation, no tax is withheld at source from dividend payments
made by the Company.
(i)

Individuals
UK tax resident individual Shareholders who receive a dividend from the Company
will generally be entitled to a tax credit, which can be set off against the individual’s
income tax liability on the dividend payment. The rate of tax credit on dividends
paid by the Company will be 10 per cent. of the aggregate total of the dividend
payment and the tax credit (the “gross dividend”) or 1/9th of the dividend payment.
UK tax resident individual Shareholders will generally be taxable on the grossdividend, which will be treated as the top slice of that Shareholder’s income. An
individual Shareholder who is not liable to UK income tax at a rate higher than thebasic rate (currently 20 per cent.) will pay tax on the gross dividend at the dividend
ordinary rate, currently 10 per cent. Accordingly, the tax credit will be treated assatisfying that individual Shareholder’s liability to UK income tax in respect of thedividend and there will be no further tax to pay.
To the extent that a UK tax resident individual Shareholder’s income (including thegross dividend) is subject to the higher rate of UK income tax (currently 40 per cent.),
that Shareholder will be subject to UK income tax on the gross dividend at thedividend upper rate of 32.5 per cent. but will be able to set the tax credit against thisliability. Accordingly, the additional UK income tax for such a Shareholder would be
22.5 per cent. of the gross dividend, which is equivalent to an effective tax rate of
25 per cent. on the net dividend received by that Shareholder.
To the extent that a UK tax resident individual Shareholder’s income (including
the gross dividend) is subject to the additional rate of UK income tax (currently
50 per cent.), that Shareholder will be subject to UK income tax on the grossdividend at the rate of 42.5 per cent. but will be able to set the tax credit against
this liability. Accordingly, the additional UK income tax for such a Shareholder
would be 32.5 per cent. of the gross dividend, which is equivalent to an effective
tax rate of 36.1 per cent. on the net dividend received by that Shareholder.
The trustees of discretionary trusts are liable to account for income tax at thedividend trust rate, which is currently 42.5 per cent.
Tax credits are not repayable to any Shareholder with no liability to UK income tax
or whose UK income tax liability does not exceed the amount of the tax credit.

(ii)

Corporates
Subject to anti avoidance rules and certain exclusions for insurance companies andcompanies which hold shares as trading stock, a Shareholder which is a company
resident in the UK for tax purposes, and which receives a dividend from theCompany, is likely to be exempt from taxation, however, such shareholders shouldseek separate advice from their own professional advisers. However, such a corporate
Shareholder would not be entitled to claim any repayment of the tax credit attaching
to any such dividend.

15.4 UK Stamp Duty and Stamp Duty Reserve Tax
15.4.1 No liability to stamp duty or stamp duty reserve tax (“SDRT”) should arise on the issue of
the New Placing Shares pursuant to the Placing. Each Selling Shareholder shallbe responsible for any stamp duty or SDRT that arises on the sale of their Selling
Shareholder Shares.

10015.4.2

Subsequent transfers of Ordinary Shares inside CREST will generally be liable to SDRT at
the rate of 0.5 per cent. of the amount or value of the consideration calculated to the nearest
penny. Subsequent transfers of Ordinary Shares outside CREST will generally be liable toad valorem stamp duty, at the rate of 0.5 per cent. of the amount or value of the consideration(rounded up to the nearest £5). Payment of this ad valorem stamp duty generally “franks”
any additional charge to SDRT which could arise in relation to the same transfer.

The comments set out above are intended only as a general guide to the current tax position in
the UK at the date of this document and should not be construed as constituting advice. The
rates and basis of taxation can change and will be dependent on a Shareholder’s personal
circumstances, and potential investors should obtain advice from their own professional advisers.
16. The Takeover Code16.1 As the Company is a public limited company, it is subject to the provisions of the Takeover Code.
The Takeover Code is based upon a set of ‘General Principles’ (which are essentially statements ofstandards of commercial behaviour) and has been designed to ensure:
16.1.1 that shareholders are treated fairly and are not denied an opportunity to decide on the
merits of a takeover; and16.1.2 that shareholders of the same class are afforded equivalent treatment by an offeror.
The Takeover Code also provides an orderly framework within which takeovers are conducted. In
addition, it is designed to promote, in conjunction with other regulatory regimes, the integrity of
the financial markets.
Mandatory Offers
16.2 Under the Takeover Code, if an acquisition of shares were to increase the aggregate holding of theacquirer and its concert parties to shares carrying 30 per cent. of more of the voting rights in the
Company, the acquirer and, depending on the circumstances, its concert parties, would be required(except with the consent of the Panel on Takeovers and Mergers) to make a cash offer for theoutstanding shares in the Company at a price not less than the highest price paid for the shares by
the acquirer or its concert parties during the previous 12 months. This requirement would also be
triggered by any acquisition of shares by a person holding (together with its concert parties) sharescarrying between 30 and 50 per cent. of the voting rights in the Company if the effect of suchacquisition were to increase that person’s percentage of the voting rights.
Takeover Bids
16.3 As at the date of this document, there has been no public takeover bid by a third party for all or
any part of the Company’s equity share capital since its incorporation.
Squeeze-out
16.4 Under the Companies Acts, a person who makes an offer to acquire shares in the Company (an‘‘offeror’’) may require Shareholders to transfer their shares to the offeror, on the terms of thatoffer, provided that the offer is approved or accepted by the holders of 90 per cent. or more of theshares to which the offer relates within four months of the making of the offer. In order to enforce
this right, the offeror must give notice to any Shareholder not approving or accepting the offer
within two months of the end of that four month period, notifying them of the offeror’s wish toacquire their shares in the Company (the ‘‘Squeeze-out Notice’’). After the expiration of one monthafter the giving of the Squeeze-out Notice, the offeror can require that the Company registers theshares in their name provided that the consideration due to the holders of such shares is delivered
to the Company to be held on trust for such Shareholders. Within one month of receiving the
Squeezeout Notice, a Shareholder who has not approved or accepted the offer may apply to theRoyal Court in Guernsey to cancel that notice if it thinks fit.

101

Sell-out
16.5 The Companies Act also gives minority shareholders in the Company a right to be bought out incertain circumstances by an offeror who had made a takeover offer. If a takeover offer related to
all the shares and at any time before the end of the period within which the offer could be accepted
the offeror held or had agreed to acquire not less than 90 per cent. of the shares, any holder of theshares to which the offer relates who has not accepted the offer can by a written communication tothe offeror require it to acquire those shares.
16.6 The offeror would be required to give any shareholder notice of his right to be bought out within
one month of that right arising. The offeror may impose a time limit on the rights of minority
shareholders to be bought out, but that period cannot end less than three months after the end of
the acceptance period. If a shareholder exercises its rights, the offeror is bound to acquire thoseshares on the terms of the offer or on such other terms as may be agreed.
17. Working Capital
The Directors are of the opinion that, having made due and careful enquiry and taking into account thenet proceeds of the Placing receivable by the Company, the working capital available to the Group will,from the time of Admission, be sufficient for its present requirements, that is for at least twelve months
from the date of Admission.
18. Significant Change
There has been no significant change in the financial or trading position of the Group since 31 December
2010, being the date to which the last audited consolidated accounts of the Group were drawn up.
19. Litigation
There are no, and have been no governmental, legal or arbitration proceedings (including any suchproceedings which are pending or threatened of which the Company is aware) at any time in the 12 months
immediately preceding the date of this document, in each case which may have, or have had in the recent
past, significant effects on the Company’s and/or the Group’s financial position or profitability.
20. General
20.1 The net total costs (including fees and commissions) (exclusive of recoverable VAT) payable by
the Company in connection with the Placing and Admission are estimated to amount to£0.8 million. The estimated net cash proceeds accruing to the Company from the Placing are£4.2 million.

AR Anx 3:
1.2
AR Sch 2;
para (e)AR Anx 1 –20.9

AR Anx 1 –20.8

AR Anx 3 –8.1

20.2 Following the issue of the Additional Shares and the New Placing Shares to be allotted pursuant to
the Placing, the existing Shareholders immediately prior to Admission will experience a dilutionof approximately 18 per cent. of their interests in the Company.

AR Anx 3 –9.1

20.3 Grant Thornton UK LLP, a member of the Institute of Chartered Accountants in England and Wales
and whose registered address is at Grant Thornton House, Melton Street, Euston Square, Euston,
London NW1 2EP, is acting as Reporting Accountant and is also the Company’s auditor. Grant
Thornton LLP accepts responsibility for its reports set out in Part 3 of this document. To the bestof the knowledge of Grant Thornton UK LLP (who have taken all reasonable care to ensure thatsuch is the case), the information contained in its reports is in accordance with the facts and does
not omit anything likely to affect the import of such information.

AR Anx 1 –1.1
AR
Anx 3 –
10.2; 10.3;
10.4
AR Anx 1 –1.2
Ar Anx 3 –10.3

20.4 Canaccord Genuity Limited has given and has not withdrawn its written consent to the inclusionin this document of its letter and name in the form and context in which it is included.
20.5 Grant Thornton UK LLP has given and has not withdrawn its written consent to the inclusion inthis document of its letter and name in the form and context in which it is included.

102

AR Anx 3 –18.3

20.6 There are no arrangements in place under which future dividends are to be waived or agreed to
be waived.
20.7 As at the date of this document, so far as the Directors are aware there are no environmental issues
that may affect the Company’s utilisation of its tangible fixed assets.
20.8 The Company confirms that third party information is sourced where it appears in this document
and has been accurately reproduced and so far as the Company is aware and is able to ascertainfrom the information published by that third party, no facts have been omitted which would render
the reproduced information inaccurate or misleading.
20.9 No person (other than the Company’s professional advisers otherwise disclosed in this document
and trade suppliers) has received, directly or indirectly, from the Company within the twelve months
preceding the date of this document, or entered into contractual arrangements (not otherwise
disclosed in this document) to receive, directly or indirectly, from the Company on or after
Admission, fees totalling £10,000 or more, securities in the Company with a value of £10,000 or
more (calculated on the basis of 180p per share, being the expected opening price for trading of theOrdinary Shares) or any other benefit with a value of £10,000 or more at the date of this document.
21. Publication of this Document
21.1 Copies of this document shall be available on the Company’s website: www.ubisense.net, and freeof charge during normal business hours on any day (except Saturdays, Sundays and public holidays)
from the Company at its registered office and from the offices of Mills & Reeve LLP,
130 Fenchurch Street, London, EC3M 5DJ from the date of this document until the date which isone month from the date of Admission.

103

AR Anx 1 –8.2

Millnet Financial (8793-01)