VICT Victory Vct

TIDMVICT TIDMATI2

RNS Number : 1974P

Victory VCT PLC

29 September 2011

JOINT ANNOUNCEMENT

VICTORY VCT PLC

AMATI VCT 2 PLC

29 SEPTEMBER 2011

RECOMMENDED PROPOSALS FOR A MERGER BETWEEN VICTORY VCT PLC ("VICTORY") AND AMATI VCT 2 PLC ("AMATI VCT 2") TO BE EFFECTED BY PLACING AMATI VCT 2 INTO MEMBERS' VOLUNTARY LIQUIDATION PURSUANT TO SECTION 110 OF THE INSOLVENCY ACT 1986 AND THE TRANSFER BY AMATI VCT 2 OF ALL OF ITS ASSETS AND LIABILITIES TO VICTORY IN CONSIDERATION FOR NEW SHARES OF 5 PENCE EACH IN VICTORY ("VICTORY SHARES") AND THE CANCELLATION OF THE LISTING OF THE ORDINARY SHARES OF 10 PENCE EACH IN AMATI VCT 2 ("AMATI VCT 2 SHARES") AND OTHER RECOMMENDED PROPOSALS IN RELATION TO VICTORY, INCLUDING SHARE OFFERS TO RAISE UP TO GBP30 MILLION, ENHANCED SHARE BUY BACK AND REINVESTMENT FACILITY, A SHARE RECONSTRUCTION, A CHANGE TO THE INVESTMENT POLICY AND A DIVIDEND REINVESTMENT SCHEME.

SUMMARY

The boards of ViCTory and Amati VCT 2 announced on 7 July 2011 that that they were in discussions with a view to a possible merger of the two companies. These discussions have now concluded and both boards are writing to their respective shareholders with proposals for consideration for the proposed merger (the "Scheme") and other proposals relating to ViCTory. The boards of ViCTory and Amati VCT 2 consider that the interests of each company's shareholders will be better served by the merger which will result in a single company with a larger asset base, with increased cost efficiencies and an improved spread of risk, with the ability to raise further funds whilst sustaining share buy back demand.

Regulations in force since 2004 have permitted VCTs to merge without shareholders losing their VCT tax relief.

The Scheme will be effected by Amati VCT 2 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 Amati VCT 2 will be transferred to ViCTory in exchange for New ViCTory Shares (which will be issued directly to the shareholders of Amati VCT 2). The merger will be completed on a relative net asset basis.

The effective date for the transfer of the assets and liabilities of Amati VCT 2 and the issue of New ViCTory Shares pursuant to the Scheme is expected to be 8 November 2011 (the "Effective Date"), following which the listing of the Amati VCT 2 Shares will be cancelled and Amati VCT 2 will be wound up.

The Scheme is conditional, inter alia, on the approval of certain resolutions to be proposed to shareholders of ViCTory and Amati VCT 2 at general meetings to be held on 31 October 2011 for ViCTory ("ViCTory GM") and Amati VCT 2 ("Amati VCT 2 GM 1"), and 8 November 2011 for Amati VCT 2 only ("Amati VCT 2 GM 2") and dissent not having been expressed by shareholders of Amati VCT 2 holding more than 5 per cent. of the issued Amati VCT 2 Shares.

In addition to the Scheme, the board of ViCTory is proposing to undertake Share Offers to raise up to GBP30 million and to introduce an Enhanced Share Buy Back and Reinvestment Facility for ViCTory Shareholders (and Amati VCT 2 Shareholders after they have received their New ViCTory Shares on the Scheme taking effect) who wish to use the proceeds from selling Shares in ViCTory in order to apply for Offer Shares under the Share Offers. The Share Offers are conditional on the passing of certain of the resolutions to be proposed to ViCTory Shareholders at the ViCTory GM.

The board of ViCTory is also proposing to undertake a Share Reconstruction and to establish a Dividend Reinvestment Scheme, both of which are standalone proposals.

The board of ViCTory also considers it appropriate to renew share issue authorities for ViCTory and to cancel both the share premium account and the capital redemption reserve of ViCTory.

The board of Amati VCT 2 has previously declared a second interim dividend of 3.0p per Amati VCT 2 Share which, irrespective of the implementation of these proposals, will be paid on 14 October 2011 to Amati VCT 2 Shareholders on the register on 14 September 2011. The board of ViCTory has also declared an interim dividend of 1.0p per ViCTory Share which, irrespective of the implementation of these proposals, will be paid on 18 October 2011 to ViCTory Shareholders on the register on 23 September 2011.

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 ViCTory and Amati VCT 2 entered into discussions to consider a merger of the companies to create a single larger VCT and reduce the overall running costs. Following detailed consideration of the portfolio and financial position of each company, both of which are managed by Amati Global Investors Limited (the "Manager") and have broadly similar investment policies, the boards of ViCTory and Amati VCT 2 have reached an agreement to recommend that the companies be merged.

The main purpose of the proposed merger is to create a single larger VCT that will bring a number of advantages to both sets of shareholders, namely:

-- restoring efficiencies of scale through the creation of a single VCT of a larger size with a greater capital base over which to spread administration, regulatory and management costs (including the significant fixed costs of maintaining the listing of a VCT on the Official List);

-- extending the potential life of both VCTs through the enlarged VCT, allowing investors to benefit from the mature portfolio of qualifying investments which has been built up over many years and which, following the restructuring undertaken by the Manager, will be focused on businesses which the Manager believes have strong prospects even against a difficult economic backdrop;

-- facilitating the possibility of raising new funds, and hence also being able to sustain a share buy back policy for investors who wish to exit; and

-- ViCTory and the Manager agreeing that (if the Scheme takes effect) the annual running costs will be capped at 3.5 per cent. of the Enlarged Company's net assets, any excess being met by the Manager by way of a reduction in future management fees.

Shareholders should note that the merger will be outside the provisions of the City Code on Takeovers and Mergers.

The board of ViCTory believes that the proposed Share Offers are attractive because:

-- investors will gain access to an attractive and mature portfolio of Qualifying Investments, which is diversified by a spread of Non-Qualifying Investments encompassing a range of global investment themes;

-- the Enlarged Company's top 20 investments (as at 31 August 2011) would represent over 48 per cent. of the combined net asset value. These investments would have a weighted average market capitalisation of GBP154 million, and be in companies which, in the Manager's view, have good prospects for earnings growth, and robust financial positions. If the two portfolios were combined as at 31 August 2011 the top ten holdings would have been Lo-Q (4.0 per cent.), Brooks Macdonald (3.1 per cent.), Synergy Health (2.8 per cent.), Green Compliance (2.7 per cent.), Anglo Pacific (2.7 per cent.), Tikit (2.7 per cent.), Prezzo (2.6 per cent.), Idox (2.6 per cent.), Asian Citrus (2.5 per cent.) and Cupid (2.4 per cent.);

-- the Manager is an award winning small cap team, and has recognised expertise in managing AIM VCTs, with the most recent share offer from Amati VCT plc having been awarded the highest rating (87 out of 100) amongst VCT share offers in the last tax year from Martin Churchill's independent publication, Tax Efficient Review;

-- the Directors and Manager believe AIM remains an attractive source of financing for innovative and high-quality companies, and that compelling Qualifying Investment opportunities will continue to arise in this market.

The board of ViCTory is proposing to allocate up to GBP2 million of New Shares which may be issued pursuant to the Share Offers for the Dividend Reinvestment Scheme, further details of which are provided below.

The proposed Share Offers enable the board of ViCTory to offer the Enhanced Share Buy Back and Reinvestment Facility, which allows participating Shareholders to sell their Shares to ViCTory at a one per cent. discount to the most recently published NAV per ViCTory Share, prior to the allotment if the selling Shareholder applies the net proceeds to subscribe for Offer Shares under the Share Offers. The board of ViCTory believes that the Enhanced Share Buy Back and Reinvestment Facility is attractive because it increases the likelihood of establishing a significant pool of Shareholders committed to another five years of investment, thus increasing the longevity of the Enlarged Company.

The Share Offers effectively mark a re-launch of ViCTory, and to reflect this the board of ViCTory is proposing a Share Reconstruction in order to re-base the Net Asset Value of ViCTory to approximately 100p per Share. The board believes this will make it easier for Shareholders to monitor progress of ViCTory from this point on. It is proposed that the Share Reconstruction be implemented irrespective of whether the Scheme proceeds or not.

Conditional upon the Scheme becoming effective, the board of ViCTory proposes that the name of ViCTory be changed to "Amati VCT 2 plc".

The board of ViCTory is proposing the Dividend Reinvestment Scheme to enable Shareholders to use all of their dividends to subscribe for further New Shares in a cost effective manner. The price at which New Shares will be issued pursuant to the prospectus is the NAV per New Share as close as reasonably practical to the dividend payment date. Dividend Reinvestment enables Shareholders to increase their total holding in ViCTory without incurring dealing costs, issue costs or stamp duty (ViCTory bears all of the costs of operating the Scheme). Subject to the limits on investments in VCTs, New Shares issued under the Dividend Re-investment Scheme should qualify for the VCT tax reliefs that are applicable to subscriptions for new VCT shares.

EXPECTED TIMETABLES

MERGER

EXPECTED TIMETABLE FOR VICTORY

(Dates subject to variation if any General Meeting is adjourned)

 
   Latest time for receipt of forms of              2.00 pm on 29 October 2011 
   proxy for the General Meeting 
   General Meeting                                  2.00 pm on 31 October 2011 
   Calculation Date                           after 5.00 pm on 7 November 2011 
   Effective Date for the transfer of                          8 November 2011 
   the assets and liabilities of Amati 
   VCT 2 to ViCTory and the issue of 
   Consideration Shares to Amati VCT 2 
   Shareholders 
   Announcement of the results of the                          8 November 2011 
   Scheme 
   Admission of and dealings in the                            9 November 2011 
   New Shares (in respect of the 
   Scheme) to commence 
   CREST accounts credited with the                            9 November 2011 
   New Shares (in respect of the 
   Scheme) 
   Effective date of the Share           after close of business on 9 November 
   Reconstruction                                                         2011 
   Amendment to the listing of the                            10 November 2011 
   Shares arising from the Share 
   Reconstruction 
   CREST accounts credited with the                           10 November 2011 
   New Shares (in respect of the Share 
   Reconstruction) 
   Certificates for the New Shares                            16 November 2011 
   dispatched 
 

EXPECTED TIMETABLE FOR AMATI VCT 2

(Dates subject to variation if any General Meeting is adjourned)

 
   Date from which it is advised that                          29 October 2011 
   dealings in Amati VCT 2 Shares should 
   only be for cash settlement and 
   immediate delivery of documents of 
   title 
   Latest time for receipt of forms of              2.30 pm on 29 October 2011 
   proxy for the Amati VCT 2 First General 
   Meeting 
   Amati VCT 2 First General Meeting                2.30 pm on 31 October 2011 
   Latest time for receipt of forms of              2.30 pm on 6 November 2011 
   proxy for the Amati VCT 2 Second 
   General 
   Record Date for Amati VCT 2                                 7 November 2011 
   Shareholders' entitlements under the 
   Scheme 
   Amati VCT 2 Register of Members closed                      7 November 2011 
   Calculation Date                           after 5.00 pm on 7 November 2011 
   Dealings in Amati VCT 2 Shares suspended         7:30 am on 8 November 2011 
   Amati VCT 2 Second General Meeting               2.30 pm on 8 November 2011 
   Effective Date for the transfer of the                      8 November 2011 
   assets and liabilities of Amati VCT 2 to 
   ViCTory 
   Announcement of the results of the                          8 November 2011 
   Scheme 
   Cancellation of the Amati VCT 2 Shares'          8.00 am on 9 November 2011 
   listing 
 

THE SHARE OFFERS

EXPECTED TIMETABLE FOR VICTORY

(The Share Offers may close earlier than the dates stated below if they are fully subscribed by an earlier date. The allotment of Offer Shares is at the Directors' discretion and is expected to be made monthly, although there may be additional allotments (at the Manager's discretion).)

 
   2011/2012 Offer opens                                     29 September 2011 
   Closing date for 2011/12 Offer             5.00 pm on Thursday 5 April 2012 
   2012/2013 Offer opens                                          6 April 2012 
   Closing date for applications under             5.00 pm on 5 September 2012 
   the Enhanced Share Buy Back and 
   Reinvestment Facility 
   Closing date for 2012/13 Offer                 5.00 pm on 10 September 2012 
   unless extended by the Directors 
   (but not beyond 27 September 2012) 
   Allotments of Offer Shares                monthly (or at other times at the 
                                                         Manager's discretion) 
   Dealings in Offer Shares commence             second Business Day following 
                                                                     allotment 
   CREST accounts credited                        within five Business Days of 
                                                                     allotment 
   Certificates for the Offer Shares     within ten Business Days of allotment 
   dispatched 
 

BACKGROUND TO AMATI VCT 2 AND VICTORY

ViCTory and Amati VCT 2 are both managed by Amati Global Investors Limited, an independent fund management business ultimately owned by its staff.

ViCTory was established as a venture capital trust with the name Singer & Friedlander AIM 3 VCT plc in January 2001 and was subsequently merged with two other venture capital trusts managed by Singer & Friedlander Investment Management Limited - Singer & Friedlander AIM VCT plc and Singer & Friedlander AIM 2 VCT plc - in 2006. ViCTory was renamed ViCTory VCT plc on 16 June 2009 and the Manager was appointed as investment manager on 22 March 2010. At this date, ViCTory had net assets of approximately GBP18 million. From this date up to 31 August 2011, the unaudited NAV Total Return of ViCTory has increased by 4.2 per cent., during which time the FTSE AIM All Share Total Return Index has risen by 3.7 per cent. ViCTory invests mainly in a portfolio of companies whose shares are traded on AIM, with its remaining assets invested in a portfolio of small and mid cap companies listed on the London Stock Exchange's main market, unquoted holdings and bank deposits. As at 22 September 2011, ViCTory's unaudited NAV was 41.78p per Share. Since launch, ViCTory has paid a total of 12.75p per share in dividends (including the interim dividend to be paid on 18 October 2011).

Amati VCT 2 (previously called Invesco Perpetual AIM VCT plc) is a venture capital trust launched in 2004 with the intention of investing in VCT--qualifying companies traded on AIM. On 11 February 2011 the Manager was appointed as investment manager to Amati VCT 2. From this date to 22 September 2011, the unaudited NAV Total Return of Amati VCT 2 has fallen by 5.6 per cent., during which time the FTSE AIM All Share Total Return Index has fallen by 23.7 per cent.. Since taking on this mandate the Manager has restructured the portfolio with the same approach that was adopted for ViCTory. To illustrate this new approach, the unaudited weighted average market capitalisation of the equity investments in Amati VCT 2's portfolio rose from GBP50 million on 11 February 2011 to GBP153 million on 31 August 2011. At that date, eight of the newly introduced Non-Qualifying Investments purchased by Amati VCT 2 had also been purchased for ViCTory's portfolio. In addition to this, three new Qualifying Investments have been made by both VCTs.

As at 22 September 2011 Amati VCT 2 had unaudited net assets of GBP11.6 million and its unaudited NAV per share was 26.76p. The investment portfolio as at the date of this document comprises 6 quoted, 46 AIM traded and 4 unquoted holdings. Amati VCT 2 has paid dividends totalling 30p per Share since its launch (including the second interim dividend to be paid on 14 October 2011). The investment policy of Amati VCT 2 is broadly similar to that of ViCTory and, accordingly, the proposed acquisition of the assets of Amati VCT 2 is consistent with ViCTory's investment policy.

Having re-structured the portfolios of both VCTs, the Manager now believes that both Amati VCT 2 and ViCTory are in a position to benefit from the mature portfolio of qualifying businesses which have been established over a number of years. The most successful of these investments have become substantial holdings in both VCTs as they have performed strongly, and the manager believes that these core holdings in the portfolios look well placed to continue to do so over the coming years, even against a difficult economic backdrop.

Amati Global Investors (formerly Noble Fund Managers Limited) is an independent fund management business, and is a wholly owned subsidiary of Amati Global Partners LLP, which was established by Paul Jourdan and Douglas Lawson to effect the management buy-out of Noble Fund Managers Limited. Amati Global Partners LLP is wholly owned by the staff of the Manager.

In addition to ViCTory and Amati VCT 2, the Manager manages Amati VCT, the CF Amati UK Smaller Companies Fund and the Amati Systematic Trend Fund. From launch on 24 March 2005 to 31 August 2011, Amati VCT has generated an unaudited NAV Total Return of 3.6 per cent. (excluding subscription costs and tax rebate, assuming dividends reinvested at the ex-dividend date), during which time the FTSE AIM All Share Total Return Index has fallen by 26.6 per cent. This equates to a 63.6 per cent. total return for investors who bought the fund at launch, paying the full initial costs, and receiving the full available tax relief (which was 40 per cent. in 2005), assuming that the 26.3p of dividends paid were reinvested at the ex-dividend date.

Both boards have discussed the size and future composition of the ViCTory board and it has been concluded that, subject to implementation of the Merger, James Hambro and David Page will resign as directors and two of the existing directors of the Amati VCT 2 Board, Julian Avery and Chris Macdonald, will be appointed as directors of the Enlarged Company, with Julian Avery becoming Chairman.

DOCUMENTS AND APPROVALS

Amati VCT 2 Shareholders will receive a copy of the ViCTory prospectus together with a circular convening the Amati VCT 2 GM 1 on 31 October 2011 and the Amati VCT 2GM 2 on 8 November 2011, at which Amati VCT 2 Shareholders will be invited to approve resolutions in connection with the Scheme.

ViCTory Shareholders will receive a copy of the ViCTory prospectus together with a circular convening the ViCTory GM to be held on 31 October 2011, at which ViCTory Shareholders will be invited to approve resolutions in connection with the Scheme, the Share Offers, the Enhanced Share Buy Back and Reinvestment Facility, the Dividend Reinvestment Scheme, the Share Reconstruction, a change in investment policy, and to renew share issue authorities and to cancel both ViCTory's share premium account and capital redemption reserve.

Copies of the prospectus and the circular for ViCTory, and a copy of the circular for Amati VCT 2, have been submitted to the UK Listing Authority and will be shortly available for download at the National Storage Mechanism (www.hemscott.com/nsm.do).

Manager for ViCTory and Amati VCT 2

Amati Global Investors Limited

Paul Jourdan/Douglas Lawson

Telephone: 0131 243 0411

Sponsor to ViCTory

Howard Kennedy Corporate Services LLP

Keith Lassman

Telephone: 020 7636 1616

The directors of ViCTory accept responsibility for the information relating to ViCTory 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 ViCTory and its 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 Amati VCT 2 accept responsibility for the information relating to Amati VCT 2 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 Amati VCT 2 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.

Howard Kennedy Corporate Services LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as sponsor for ViCTory and no-one else and will not be responsible to any other person for providing the protections afforded to customers of Howard Kennedy Corporate Services LLP (subject to the responsibilities and liabilities imposed by Financial Services and Markets Act 2000 and the regulatory regime established thereunder) or for providing advice in relation to any matters referred to herein.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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