UAVT Unicorn Aim Ii

 
TIDMUAV TIDMUAVT 
 
JOINT ANNOUNCEMENT 
 
UNICORN AIM VCT PLC 
 
UNICORN AIM VCT VCT II PLC 
 
29 JANUARY 2010 
 
RECOMMENDED PROPOSALS FOR A CONSOLIDATION OF THE SHARE CAPITAL OF UNICORN AIM 
VCT PLC ("VCT I") ("VCT I SHARE CONSOLIDATION") AND SUBSEQUENT MERGER BETWEEN 
VCT I AND UNICORN AIM VCT II PLC ("VCT II") TO BE COMPLETED BY PLACING VCT II 
INTO MEMBERS' VOLUNTARY LIQUIDATION PURSUANT TO SECTION 110 OF THE INSOLVENCY 
ACT 1986 AND THE TRANSFER BY VCT II OF ALL OF ITS ASSETS AND LIABILITIES TO VCT 
I IN CONSIDERATION FOR NEW ORDINARY SHARES OF 1 PENCE EACH IN THE CAPITAL OF 
VCT I ("VCT I NEW ORDINARY SHARES") IN THE CAPITAL OF VCT II AND THE 
CANCELLATION OF THE LISTING OF THE VCT II ORDINARY SHARES OF 1 PENCE EACH AND 
VCT II `C' ORDINARY SHARES OF 1 PENCE EACH IN THE CAPITAL OF VCT II ("VCT II C 
SHARES") ("THE SCHEME") 
 
SUMMARY 
 
The boards of VCT I and VCT II, both of which are managed by Unicorn Asset 
Management Limited ("Unicorn AM"), announced on 4 December 2009 that agreement 
in principle had been reached for the merger of the two companies. Both boards 
are pleased to advise that discussions have concluded and both boards are today 
writing to their respective shareholders with proposals for consideration of 
the VCT I Share Consolidation and the Scheme (the VCT I Share Consolidation and 
Scheme together "the Merger"). The Merger will, if effected, result in VCT II 
being merged into VCT I creating an enlarged company ("Enlarged Company") with 
one class of shares having net assets of over GBP55 million, which is expected to 
deliver cost savings and other strategic benefits. 
 
VCT I will firstly (subject to the Scheme becoming unconditional) complete the 
VCT I Share Consolidation by converting the ordinary shares of 1 pence each in 
the capital of VCT I ("VCT I Ordinary Shares") and the series 2 shares of 1 
pence each in the capital of VCT I ("VCT I S2 Shares") into series 3 shares of 
1 pence each in the capital of VCT I ("VCT I S3 Shares"). The VCT I S3 Shares 
(existing and those created in the above redesignations) will then subsequently 
be redesignated as ordinary shares ("VCT I New Ordinary Shares") on a relative 
net asset value ("NAV") basis. 
 
The Scheme will be effected by VCT II being placed into members' voluntary 
liquidation pursuant to a scheme of reconstruction under Section 110 of the 
Insolvency Act 1986. All of the assets and liabilities of VCT II will then be 
transferred to VCT I in consideration for VCT I New Ordinary Shares (which will 
be issued directly to the shareholders of VCT II). The Scheme will be completed 
on a relative net asset basis. 
 
The effective date for the VCT I Share Consolidation and the transfer of the 
assets and liabilities of VCT II and the issue of VCT I New Ordinary Shares 
pursuant to the Scheme is expected to be 9 March 2010 ("the Effective Date"). 
Following the Effective Date the listing of the VCT II Shares will be cancelled 
and VCT II will be wound up. 
 
The VCT I Share Consolidation and the Scheme are conditional, inter alia, on 
the approval of resolutions to be proposed to shareholders of VCT I and VCT II 
at extraordinary meetings and class meetings to be held on 25 February 2010 
(for both VCT I ("VCT I Meetings") and VCT II ("VCT II First Meetings") and on 
9 March 2010 (for VCT II only) ("VCT II Second Meeting")) and dissent not 
having been expressed by shareholders of VCT II holding more than 10 per cent. 
in nominal value of the entire issued VCT II share capital. 
 
The board of VCT I also consider it appropriate, subject to the Merger becoming 
effective, to approve revised management arrangements with Unicorn AM and amend 
the existing articles of association of VCT I to reflect the VCT I Share 
Consolidation and recent changes brought in by the Companies Act 2006. VCT I 
also proposes to renew share issue and share repurchase authorities, as well as 
approve the further cancellation of VCT I's share premium account. 
 
BACKGROUND 
 
In September 2004, the Venture Capital Trusts (Winding-up and Mergers) (Tax) 
Regulations 2004 were introduced, allowing venture capital trusts ("VCTs") to 
be acquired by, or merge with, each other without prejudicing tax reliefs 
obtained by their shareholders. A number of VCTs have now taken advantage of 
these regulations to create larger VCTs where running costs can be spread over 
a substantially greater asset base. 
 
With the above in mind, the boards of VCT I and VCT II entered into discussions 
to consider a merger of the companies to create a single larger VCT with one 
class of share to reduce the overall running costs. Following detailed 
consideration of the portfolio and financial position of each company (both of 
which are managed by Unicorn AM, have the same investment policies and common 
advisers) the boards of VCT I and VCT II have reached an agreement to recommend 
that the companies be merged. 
 
Both boards consider that this Merger will bring significant benefits to both 
groups of shareholders through: 
 
  * a reduction in annual running costs for the Enlarged Company compared to 
    the aggregate annual running costs of the separate companies and relevant 
    separate share classes in both companies; 
 
  * creation of a single VCT of a more economically efficient size with a 
    greater capital base over which to spread administration and management 
    costs; 
 
  * creation of an enlarged entity with a simplified capital structure; 
 
  * participation in a larger VCT with a more diversified portfolio thereby 
    spreading risk across a broader range of investments; 
 
  * increased ability to maintain a buy-back programme due to the increased 
    size and the reduced need to retain funds for annual expenses; 
 
  * the potential to pay distributions in the future due to the increased size 
    and reduced overall running costs; 
 
  * increased flexibility in continuing to meet the various requirements for 
    qualifying VCT status; and 
 
  * the potential of greater liquidity in the secondary market. 
 
Although either company could have acquired all of the assets and liabilities 
of the other, VCT I was selected as the acquirer because of its greater size 
(and, therefore, a lower stamp duty cost would be incurred on the transfer of 
all of the assets and liabilities from VCT II). Shareholders should note that 
the merger will be outside the provisions of the City Code on Takeovers and 
Mergers. 
 
EXPECTED TIMETABLE 
 
VCT I dividend record date                             8 January 2010 
 
VCT I dividend payment date                            29 January 2010 
 
VCT I annual general meeting                           3.00 pm 25 February 2010 
 
VCT I extraordinary general meeting                    3.30 pm 25 February 2010 
 
VCT I Ordinary Share class meeting                     3.40 pm 25 February 2010 
 
VCT I S2 Share class meeting                           3.45 pm 25 February 2010 
 
VCT I S3 Share class meeting                           3.50 pm 25 February 2010 
 
VCT II first extraordinary general meeting             4.00 pm 25 February 2010 
 
VCT II Ordinary Share class meeting                    4.10 pm 25 February 2010 
 
VCT II C Share class meeting                           4.15 pm 25 February 2010 
 
Record date for VCT I shareholders' entitlements under 8 March 2010 
the VCT I Share Consolidation and VCT II shareholders' 
entitlements under the Scheme 
 
VCT II register of members closed                      8 March 2010 
 
VCT II special dividend record date                    8 March 2010 
 
Calculation date of the Merger                         after 5.00 pm 8 March 
                                                       2010 
 
Suspension of listing of VCT II Shares                 after 7.30 am 9 March 
                                                       2010 
 
VCT II second extraordinary general meeting            10.00 am 9 March 2010 
 
Effective date for the VCT I Share Consolidation and   9 March 2010 
subsequent transfer of assets and liabilities of VCT 
II to VCT I and issue of VCT I New Ordinary Shares 
 
Announcement of results of the meetings and completion 9 March 2010 
of the Merger (if applicable) 
 
Admission of and dealings in the VCT I New Ordinary    10 March 2010 
Shares to commence 
 
CREST accounts credited with VCT I New Ordinary Shares 10 March 2010 
(in respect of the VCT I Share Consolidation and the 
Scheme) 
 
Cancellation of VCT II Share listing                   after 8.00 am 10 March 
                                                       2010 
 
VCT II special dividend payment date                   19 March 2010 
 
BACKGROUND TO VCT I AND VCT II 
 
VCT I was launched in 2001 and raised GBP33.1 million (net of expenses) through 
offers for subscription of its VCT I Ordinary Shares, GBP14.9 million (net of 
expenses) through offers for subscription of its VCT I S2 Shares and GBP4.7 
million (net of expenses) through offers of subscription of its VCT I S3 
Shares. VCT I's objective is to provide its shareholders with an attractive 
return by investing predominantly in the shares of companies listed on AIM. 
 
As at 31 December 2009, VCT I had unaudited net assets of GBP32,325,134 (57.06p 
per VCT I Ordinary Share, 72.54p per VCT I S2 Share and 93.37p per VCT I S3 
Share) and in aggregate investments in 59 companies with an unaudited valuation 
of GBP30,017,097. 
 
VCT II was launched in 2005 and has raised GBP21.8 million (net of expenses) 
through offers for subscription of VCT II Ordinary Shares and GBP11.8 million 
(net of expenses) through offers for subscription of its VCT II C Shares. VCT 
II's object is also to provide its shareholders with an attractive return by 
investing predominantly in the shares of companies listed on AIM. 
 
As at 31 December 2009, VCT II had unaudited net assets of GBP25,888,482 (80.89p 
per VCT II Ordinary Share and 68.04p per VCT II C Share) and in aggregate 
investments in 51 companies with an unaudited valuation of GBP22,626,115. 
 
THE MERGER 
 
The Merger will be effected, firstly by VCT I undertaking the VCT I Share 
Consolidation and then the merger with VCT II being completed under the Scheme. 
 
The Share Consolidation will be effected as follows: 
 
  * such number of VCT I Ordinary Shares held by a VCT I shareholder on the 
    record date will be redesignated as VCT I S3 Shares as reflects the 
    relevant proportionate number by reference to the NAVs of each share class 
    as at the calculation date, the balance being redesignated as deferred 
    shares having no economic value; 
 
  * such number of VCT I S2 Shares held by a shareholder on the record date 
    will be redesignated as VCT I S3 Shares as reflects the relevant 
    proportionate number by reference to the NAVs of each share class as at the 
    calculation date, the balance being redesignated as deferred shares having 
    no economic value; 
 
  * the deferred shares will be bought back by VCT I for an aggregate amount of 
    1p, such shares to be cancelled as issued and redesignated as VCT I Shares; 
    and 
 
  * the VCT I S3 Shares (existing and those created in the above 
    redesignations) will be redesignated as VCT I New Ordinary Shares. 
 
This VCT I Share Consolidation will result in VCT I having one class of 
ordinary shares immediately prior to the merger with VCT II. VCT I shareholders 
who hold their shares in certificated form will receive replacement share 
certificates in respect of the VCT I New Ordinary Shares arising from the VCT I 
Share Consolidation and existing share certificates will no longer be valid. 
VCT I shareholders who hold their shares in CREST will have their CREST 
accounts credited with their new holding of VCT I New Ordinary Shares. 
 
Immediately following the Share Consolidation, the Scheme will then be 
completed by VCT II being put into members' voluntary liquidation and all of 
its assets and liabilities being transferred to VCT I in consideration of VCT I 
New Ordinary Shares issued directly to VCT II's shareholders. The VCT I New 
Ordinary Shares to be issued to VCT II shareholders will be split between the 
holders of VCT II Ordinary Shares and VCT II C Shares in proportion to the 
respective net assets of each class of VCT II share as at the calculation date 
and then pro-rata to shareholdings within each class of VCT II share. For these 
purposes any VCT II shares held by dissenting VCT II shareholders will be 
disregarded from the calculation. 
 
This will result in the VCT II Ordinary Shares and the VCT II C Shares being 
merged into the VCT I New Ordinary Share class. Following the transfer, the 
listing of the VCT II Shares will be cancelled and VCT II will be wound up. VCT 
II shareholders who hold their VCT II shares in certificated form will receive 
replacement share certificates in respect of the VCT I New Ordinary Shares 
arising from the Scheme and existing share certificates will no longer be 
valid. VCT II shareholders who hold their VCT II shares in CREST will have 
their CREST accounts credited with their new holding of VCT I New Ordinary 
Shares 
 
The Merger is conditional upon the approval by the shareholders of VCT I and 
VCT II of resolutions to be proposed at the VCT I Meetings, the VCT II First 
Meetings, VCT II Second Meeting and certain other conditions as further set out 
in the documentation sent to shareholders today. 
 
The aggregate anticipated cost of undertaking the Merger is approximately GBP 
410,000, including VAT, legal and professional fees, stamp duty and the costs 
of winding up VCT II. Unicorn AM has agreed to support the Merger by making a 
contribution of GBP100,000 to the costs, which reduces the anticipated costs of 
the Merger to GBP310,000. The costs of the Merger will be split proportionally 
between VCT I and VCT II by reference to their respective Merger values 
(ignoring Merger costs and the Unicorn AM contribution). Following the Merger 
becoming effective the Unicorn AM contribution will be paid directly to the 
Enlarged Company in two instalments (the first once the Merger becomes 
effective and the second twelve months thereafter) thus benefiting all 
shareholders. 
 
Following completion of the Merger, annual cost savings for VCT I of at least GBP 
284,000 per annum (representing 0.51 per cent. per annum of the expected net 
assets of the Enlarged Company or 0.46p per VCT I New Ordinary Share) are 
anticipated to be achieved. On the basis that no new funds are raised or 
investments realised to meet annual costs, and taking into account the Unicorn 
AM contribution, both boards believe that the costs of the Merger would, 
therefore, be recovered within 14 months. 
 
Unicorn AM and the Revised Management Arrangements 
 
Unicorn AM will continue as the investment manager of VCT I (if the Merger is 
effected) on its existing annual management fee arrangements of an amount 
equivalent to 2 per cent. of the net assets of VCT I per annum, save for 
investments made by VCT I in other Unicorn AM managed funds when its fee is 
waived, which is also the same level of annual management fee paid in respect 
of VCT II. Subject to shareholder approval, the VCT I board proposes, however, 
in light of the Merger and in recognition of Unicorn AM's support of the Merger 
by contributing GBP100,000 to the costs, to provide for a new initial three year 
appointment term from the effective date of the Merger, subject to a 12 months' 
notice period which may be given by either party after the second year. 
 
Unicorn AM is currently entitled to performance incentive fees in relation to 
the performance of the various separate share classes within both VCT I and VCT 
II. Amalgamation of these varying performance incentive arrangements to the 
single class of share in the Enlarged Company would be complicated and cause an 
additional administrative burden. In addition, Matrix-Securities Limited (the 
companies' secretary and administrator), which is also entitled to performance 
incentive fees has agreed to waive its rights to such fees. The VCT I board, 
therefore, proposes to terminate the existing arrangements and enter into a 
revised performance incentive with the Enlarged Company, which will apply for 
accounting periods after 30 September 2010 (Unicorn AM having agreed to forego 
any incentive fee for the current year). 
 
The proposed revised performance incentive will be similar to the arrangements 
currently in place for the VCT I S3 Shares and both classes of VCT II shares. 
The revised arrangements will entitle Unicorn AM to 20 per cent. of subsequent 
cash distributions made to shareholders (whether by dividend or otherwise) over 
and above the Target Return in any accounting period. The Target Return for 
these purposes will be 6p per VCT I New Ordinary Share in any accounting period 
(or, if the relevant accounting period is less than or greater than 12 months, 
an amount equal to a pro rata reduction or increase to 6p per VCT I New 
Ordinary Share for that accounting period). Such payment will continue to be 
subject to a NAV maintenance `high-watermark test' but, in light of the Merger 
and the contribution Unicorn AM has agreed to make to the costs of the Merger, 
this will be rebased to the closing average NAV per VCT I New Ordinary Share in 
the relevant period equal to the NAV of a VCT I New Ordinary Share as at 30 
September 2010 (i.e. the date from which the revised performance incentive fee 
will apply). 
 
This revised performance incentive arrangement will achieve a simplified 
arrangement for the Enlarged Company and will also better align the interests 
of Unicorn AM and the shareholders of VCT I following the Merger becoming 
effected by moving to a distribution based performance incentive with a NAV 
maintenance hurdle. 
 
As the new fixed management term and the revised performance incentive 
arrangements (together the "Revised Management Arrangements") described above 
are being entered into with Unicorn AM, which is a `related party' of VCT I 
under the Listing Rules, they will constitute a related party transaction 
requiring the approval of VCT I shareholders. In addition, the Revised 
Management Arrangements will only be entered into if the Merger becomes 
unconditional. 
 
Dividends 
 
The VCT I Board declared interim capital dividends for the year ended 30 
September 2009 of 3.5p per VCT I Ordinary Share and 2.5p per VCT I S2 Share, 
paid on the dividend payment date to those holders of such shares on VCT I's 
register on the dividend record date (i.e. prior to the Merger being effected). 
VCT II has also declared special dividends of 6p per VCT II Ordinary Share and 
0.45p per VCT II C Share, conditional on the Merger becoming effective. These 
VCT II special dividends will allow cash available within VCT II to be 
distributed to the holders of VCT II shares on the register prior to the Merger 
becoming effective. The VCT II dividends (as these will be unpaid) will be 
taken into account as an adjustment in the calculation of the VCT II Merger 
value. 
 
Board Changes 
 
The current board of each company comprises four non-executive directors. Both 
boards have discussed the size and future composition of the Enlarged Company's 
board and it has been concluded that, subject to the Merger becoming effective, 
David Royds will resign as a director of the VCT I board and Malcolm Diamond 
and Jeremy Harmer (directors of VCT II) will be appointed as directors of VCT 
I. If the Merger is effected the board of the Enlarged Company will, therefore, 
be: 
 
  * Peter Dicks (Chairman) 
 
  * Jeremy Hamer (Audit Committee Chairman) 
 
  * Jocelin Harris (Senior Independent Director) 
 
  * James H Grossman 
 
  * Malcolm Diamond MBE 
 
If the Merger is effected, although the number of directors will increase, to 
ensure continuity in board representation from both companies, the total of the 
directors' fees across both VCT I and VCT II will reduce by GBP50,000 per annum. 
 
DOCUMENTS AND APPROVALS 
 
VCT I shareholders will receive a copy of a circular convening the VCT I 
Meetings to be held on 25 February 2010 (together with the VCT I prospectus and 
annual report and accounts for the year ended September 2009) at which VCT I 
shareholders will be invited to approve resolutions in connection with the 
Merger, the Revised Management Arrangement, amend the company's articles of 
association, renew share issue and share repurchase authorities and approve the 
cancellation of VCT I's share premium account. 
 
VCT II shareholders will receive a circular convening the VCT II First Meetings 
on 25 February 2010 and the VCT II Second Meeting on 9 March 2010 (together 
with the VCT I prospectus) at which VCT II shareholders will be invited to 
approve resolutions in connection with the Scheme. 
 
Copies of the VCT I annual reports and accounts for the year ended September 
2009, the prospectus and the circular for VCT I and VCT II have been submitted 
to the UK Listing Authority and will be shortly available for inspection at the 
UK Listing Authority's Document Viewing Facility which is situated at: 
 
Financial Services Authority 
25 The North Colonnade 
Canary Wharf 
London E14 5HS 
 
Telephone: 0207 066 1000 
 
Investment Manager for VCT I and VCT II 
Unicorn Asset Management Limited 
Chris Hutchinson 
Telephone: 020 7253 0889 
 
Company Secretary and Administrator for VCT I and VCT II 
Matrix-Securities Limited 
Robert Brittain 
Telephone: 020 3206 7000 
 
Solicitors to VCT I and VCT II 
Martineau 
Kavita Patel 
Telephone: 0870 763 2000 
 
Sponsor to VCT I 
Howard Kennedy 
Keith Lassman 
Telephone: 0207 636 1616 
 
The directors and the proposed directors of VCT I accept responsibility for the 
information relating to VCT I and its directors and proposed directors 
contained in this announcement. To the best of the knowledge and belief of such 
directors and proposed directors (who have taken all reasonable care to ensure 
that such is the case), the information relating to VCT I and its directors and 
proposed directors contained in this announcement, for which they are solely 
responsible, is in accordance with the facts and does not omit anything likely 
to affect the import of such information. 
 
The directors of VCT II accept responsibility for the information relating to 
VCT II and its directors contained in this announcement. To the best of the 
knowledge and belief of such directors (who have taken all reasonable care to 
ensure that such is the case), the information relating to VCT II and its 
directors contained in this document, for which they are solely responsible, is 
in accordance with the facts and does not omit anything likely to affect the 
import of such information. 
 
Martineau are acting as legal advisers for VCT I and VCT II and for no one else 
in connection with the matters described herein and will not be responsible to 
anyone other than VCT I and VCT II for providing the protections afforded to 
clients of Martineau or for providing advice in relation to the matters 
described herein. 
 
Howard Kennedy, which is authorised and regulated in the United Kingdom by the 
Financial Services Authority, is acting as sponsor for VCT I and no one else 
and will not be responsible to any other person for providing the protections 
afforded to customers of Howard Kennedy or for providing advice in relation to 
any matters referred to herein. 
 
 
 
END 
 

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