Regulatory Filings • Jan 27, 2011
Regulatory Filings
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If you are in any doubt about the action to be taken, you should immediately consult your bank manager, stockbroker, solicitor, accountant or other independent financial adviser authorised pursuant to the Financial Services and Markets Act 2000.
If you have sold or otherwise transferred all of your Shares in Keydata Income VCT 1 plc and Keydata Income VCT 2 plc (''Keydata 1'' and ''Keydata 2'' respectively), please send this document and accompanying documents, as soon as possible, to the purchaser or transferee or to the stockbroker, independent financial adviser or other person through whom the sale or transfer was effected for delivery to the purchaser or transferee.
In connection with the Proposals, Opus Corporate Finance LLP (''Opus'') is acting for the Keydata 1 and Keydata 2 and no-one else and will not be responsible to anyone other than the Keydata 1 and Keydata 2 for providing the protections afforded to customers of Opus nor for providing advice in relation to the Proposals. Opus is authorised and regulated in the United Kingdom by the FSA.
BDO LLP (''BDO'') is acting for the Keydata 1 and Keydata 2 and Foresight VCT plc (''Foresight VCT'') and noone else and will not be responsible to anyone other than the Keydata 1 and Keydata 2 and Foresight VCT for providing the protections afforded to customers of BDO nor for providing advice in relation to the Proposals. BDO is authorised and regulated in the United Kingdom by the FSA.
R W Blears LLP, which is regulated in the United Kingdom by the Solicitors Regulation Authority, is acting as legal adviser to Keydata 1 and Keydata 2 and Foresight VCT and no-one else and will not be responsible to any other person for providing advice in connection with any matters referred to herein.
Registered in England and Wales with registered number
05366736
Registered in England and Wales with registered number 05366735
Your attention is drawn to the letter from the chairman of Keydata 1 and Keydata 2 set out in Part III of this document which contains a recommendation to vote in favour of the resolutions to be proposed at the Meetings referred to below. Your attention is also drawn to the risk factors set out in Part II of this document.
You will find set out at the end of this document notices of the First General Meetings to be held on 18 February 2011 from 10.00 am at Over-Seas House, Park Place, St James's Street, London SW1A 1LR to approve the Scheme and of the Second General Meetings to be held on 28 February 2011 from 10.00 am at ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU to place both Keydata 1 and Keydata 2 into members' voluntary liquidation. To be valid, the appropriate forms of proxy attached to this document for the meetings should be returned not less than 48 hours before the relevant meeting, either by post or by hand (during normal business hours only) to Keydata 1 and Keydata 2's registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6ZL. For further information on any of the meetings or the completion and return of a form of proxy, please telephone the Equiniti Limited helpline on telephone number 0871 384 2868 or +44 (0) 121 415 7047 from overseas. Calls to the UK helpline are charged at 8p per minute from a BT landline. Charges from other telephone providers may vary. Calls to the helpline from outside of the UK will be charged at applicable international rates. Lines are open from 8.30 am to 5.30 pm, Monday to Friday.
This document should be read in conjunction with the Prospectus issued by Foresight VCT plc. The Prospectus includes the Registration Document dated 28 January 2010 and the Summary and Securities Note dated 27 January 2011 which accompanies this document.
| EXPECTED TIMETABLES 3 | |
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| CORPORATE INFORMATION 4 | |
| PART I – DEFINITIONS 5 |
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| PART II – RISK FACTORS 9 |
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| PART III – LETTER FROM THE CHAIRMAN OF KEYDATA 1 AND KEYDATA 2 11 |
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| PART IV – THE SCHEME 21 |
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| PART V – FURTHER INFORMATION ON KEYDATA 1 AND KEYDATA 2 27 |
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| PART VI – FORESIGHT VCT 28 |
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| PART VII – TAXATION 31 |
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| PART VIII – ADDITIONAL INFORMATION 33 | |
| NOTICE OF FIRST GENERAL MEETING - KEYDATA 1 37 | |
| NOTICE OF SECOND GENERAL MEETING - KEYDATA 1 41 | |
| NOTICE OF FIRST GENERAL MEETING - KEYDATA 2 45 | |
| NOTICE OF SECOND GENERAL MEETING - KEYDATA 2 49 | |
| FORMS OF PROXY FOR KEYDATA 1 AND KEYDATA 2 – FIRST GENERAL MEETINGS ENCLOSED |
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| FORMS OF PROXY FOR KEYDATA 1 AND KEYDATA 2 |
– SECOND GENERAL MEETINGS ENCLOSED
| Latest time for receipt of forms of proxy for the First General Meetings |
10.00 am and 10.05 am on 16 February 2011 |
|---|---|
| First General Meetings | 10.00 am and 10.05 am on 18 February 2011 |
| Date from which it is advised that dealings in Shares should only be for cash settlement and immediate delivery of documents of title |
22 February 2011 |
| Record Date for Shareholders' entitlements under the Scheme |
24 February 2011 |
| Register of Members of Shareholders closed | 24 February 2011 |
| Calculation Date | After 5.00 pm on 24 February 2011 |
| Latest time for receipt of forms of proxy for the Second General Meetings |
10.00 am and 10.05 am on 26 February 2011 |
| Second General Meetings | 10.00 am and 10.05 am on 28 February 2011 |
| Effective Date for the transfer of the assets and liabilities of Keydata 1 and Keydata 2 to Foresight VCT and the issue of Initial New Foresight VCT Shares |
28 February 2011 |
| Announcement of the results of the Second General Meetings and completion of the Scheme |
28 February 2011 |
| Cancellation of the listings of the Shares in Keydata 1 and Keydata 2 |
1 March 2011 |
| Latest time for receipt of forms of proxy for the Foresight Meetings |
12 noon on 16 February 2011 |
|---|---|
| Foresight Meetings | 12 noon on 18 February 2011 and thereafter |
| Calculation Date | After 5.00 pm on 24 February 2011 |
| Effective Date for the transfer of the assets and liabilities of Keydata 1 and Keydata 2 to Foresight VCT and the issue of Initial New Foresight VCT Shares |
28 February 2011 |
| Announcement of the results of the Foresight Meetings and completion of the Scheme |
28 February 2011 |
| Admission of and dealings in the Initial New Foresight VCT Shares to commence |
1 March 2011 |
| Reconstruction of the Foresight Ordinary Share capital by the creation and off market purchase of Deferred Shares |
After close of business 1 March 2011 |
| Certificates for the Initial New Foresight VCT Shares despatched by |
8 March 2011 |
Stephen Oxenbridge (Chairman) David Hurst-Brown
Foresight Fund Managers Limited ECA Court 24-26 South Park Sevenoaks Kent TN13 1DU
Foresight Group LLP ECA Court 24-26 South Park Sevenoaks Kent TN13 1DU
R W Blears LLP 125 Old Broad Street, London EC2N 1AR
Opus Corporate Finance LLP 1 Bell Yard London WC2A 2JR
ECA Court 24-26 South Park Sevenoaks Kent TN13 1DU
Company Registration Number of Keydata 1 05366736 Company Registration Number of Keydata 2 05366735 www.foresightgroup.eu
Telephone Number 01732 471 800
Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA
BDO LLP 55 Baker Street London W1U 7EU
Singer Capital Markets Limited 1 Hanover Street London W15 1YZ
125 Colmore Row Birmingham B3 3SD
| ''Additional Consideration'' | the additional consideration payable to Shareholders who participate in the Scheme in the form of Additional New Foresight Shares subject to and in accordance with the terms of the Scheme |
|---|---|
| ''Additional New Foresight VCT Shares'' |
the additional New Foresight VCT Shares to be issued to Shareholders pursuant to and in accordance with the Scheme (and each an ''Additional New Foresight VCT Share'') equal in aggregate value to the Additional Consideration for the Shares |
| ''Admission'' | the date on which the Initial New Foresight VCT Shares are listed on the Official List of the UK Listing Authority and admitted to dealing on the London Stock Exchange's market for listed securities |
| ''Articles'' | the articles of association of Keydata 1 and Keydata 2, as amended from time to time |
| ''Board'' or ''Directors'' | the boards of directors of Keydata 1 and Keydata 2 |
| ''Boyle'' | Boyle Electrical Generation Limited |
| ''Burley'' | Burley Energy Limited |
| ''CA 1985'' | Companies Act 1985, as amended |
| ''CA 2006'' | Companies Act 2006, as amended |
| ''Calculation Date'' | the date on which the Roll-Over Value and the Merger Value will be calculated, this being 24 February 2011 |
| ''Clarke'' | Clarke Power Services Limited |
| ''Companies Acts'' | CA 1985 and CA 2006 |
| ''Companies'' | Keydata Income VCT 1 plc and Keydata Income VCT 2 plc |
| ''Cooke'' | Cooke Generation Limited |
| ''Deferred Shares'' | that number of Foresight VCT Shares which (following the issue of the Initial New Foresight VCT Shares pursuant to the Scheme) will be redesignated as Deferred Shares and repurchased by Foresight VCT for a nominal consideration as part of a general reconstruction of its issued Foresight VCT Shares so as to ensure, as nearly as practicable, that the net asset value per share of the remaining Foresight VCT Shares shall be 100 pence |
| ''Derby Project'' | the proposed 3MW biomass-fuelled electricity generation station in Derby within the scope of the Planning Permission to be built in stages between 2011 and 2012 including the Equipment and all other tangible and intangible assets, liabilities, revenues, profits and business directly attributable or derived therefrom |
| ''Enterprise Value of the Derby Project'' |
the fair value of the ownership interests held by Participators in the Derby Project on the basis of the 12 months ending 30 September 2013 estimated by Foresight Group LLP in accordance with a methodology regarded as appropriate by the auditors of Foresight VCT in the context of the International Private Equity and Venture Capital Valuation Guidelines |
| ''Effective Date'' | the date on which the Scheme will be completed, this being anticipated as 28 February 2011 |
| ''Enhanced Buyback'' | the proposed tender offer by Foresight VCT to purchase existing Foresight VCT Shares held by Foresight VCT Shareholders where such selling Foresight VCT Shareholders commit to acquire new Foresight VCT Shares pursuant to an open offer made by Foresight VCT |
|---|---|
| ''Enlarged Company'' | Foresight VCT following implementation of the Scheme |
| ''Equiniti'' | Equiniti Limited |
| ''the Equipment'' | all the equipment (mainly engines and gasification equipment in storage) acquired by the Keydata Portfolio Companies for the purposes of the Derby Project prior to 23 December 2010 |
| ''First General Meetings'' | the first general meetings of Keydata 1 and Keydata 2 to be held on 18 February 2011 |
| ''Foresight VCT'' | Foresight VCT plc, registered in England and Wales under number 03421340 whose registered office is at ECA Court, South Park, Sevenoaks, Kent TN13 1DU |
| ''Foresight VCT Board'' | the board of directors of Foresight VCT |
| ''Foresight Group'' | Foresight Group LLP, the investment manager to the Companies and Foresight VCT, of ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU |
| ''Foresight Circular'' | the circular to Foresight VCT Shareholders dated 27 January 2011 |
| ''Foresight VCT Shareholders'' | the holders of Foresight VCT Shares |
| ''Foresight Meetings'' | the general meeting, ordinary shareholder class meeting and planned exit shareholder class meeting of Foresight VCT to be held on 18 February 2011 |
| ''Foresight VCT Shares'' | ordinary shares of one pence each in the capital of Foresight VCT (and each a ''Foresight VCT Share'') |
| ''FSA'' | Financial Services Authority |
| ''HMRC'' | HM Revenue & Customs |
| ''IA 1986'' | Insolvency Act 1986, as amended |
| ''ICTA 1988'' | Income and Corporation Taxes Act 1988, as amended |
| ''Initial New Foresight VCT Shares'' |
the new Foresight VCT Shares to be issued to Shareholders pursuant to and in accordance with the Scheme (and each an ''Initial New Foresight VCT Share'') equal in value to the Roll Over Value of the Shares |
| ''ITA 2007'' | Income Tax Act 2007, as amended |
| ''Keydata 1'' | Keydata Income VCT 1 plc registered in England and Wales under number 05366736, whose registered office is at ECA Court, 24-26 South Park, Sevenoaks, Kent, TN13 1DU |
| ''Keydata 1 Shares'' | ordinary shares of 1p each in the capital of Keydata 1 |
| ''Keydata 2'' | Keydata Income VCT 2 plc registered in England and Wales under number 05366735, whose registered office is at ECA Court, 24-26 South Park, Sevenoaks, Kent, TN13 1DU |
| ''Keydata 2 Shares'' | ordinary shares of 1p each in the capital of Keydata 2 |
| ''Keydata Investment Services'' | Keydata Investment Services Limited |
| ''Keydata Portfolio Companies'' | all those companies in which Keydata 1 and Keydata 2 hold shares as at the date of this document |
| ''Liquidators'' | Ian Schofield and Charles Escott, both of PKF (UK) LLP, whose registered office is at Farringdon Place, 20 Farringdon Road, London EC1M 3AP being the liquidators for Keydata 1 and Keydata 2 |
|---|---|
| ''Listing Rules'' | the listing rules of the UKLA |
| ''Loan Creditor'' | in relation to the Keydata Portfolio Companies, means a creditor (including a person carrying on a business of banking): (a) in respect of any debt: for any money borrowed or capital assets acquired by the Keydata Portfolio Companies; for any right to receive income created in favour of the Keydata Portfolio Companies; or for consideration the value of which to the Keydata Portfolio Companies was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium on the debt); and (b) in respect of any redeemable loan capital issued by the Keydata Portfolio Companies; and, for these purposes, a person who is not the creditor in respect of any debt or loan capital, but has a beneficial interest in that debt or loan capital, is, to the extent of that interest, to be treated as a loan creditor in respect of that debt or loan capital |
| ''London Stock Exchange'' | London Stock Exchange plc |
| ''Meetings'' | the First General Meetings and the Second General Meetings |
| ''Merger Regulations'' | Venture Capital Trusts (Winding-up and Mergers) (Tax) Regulations 2004 |
| ''Merger Value'' | the value of a Foresight VCT Share calculated in accordance with paragraph 4 of Part IV of this document |
| ''NAV'' or ''net asset value'' | net asset value |
| ''Nevin'' | Nevin Energy Resources Limited |
| ''Official List'' | the official list of the UKLA |
| ''O-Gen UK'' | O-Gen UK Limited |
| ''Ordinary Share Fund'' | the capital and assets attributable to the Foresight VCT Shares |
| ''Ordinary Share Reconstruction'' |
the reconstruction, pursuant to a resolution to be proposed at the Foresight VCT general meeting, of the Foresight VCT ordinary share capital so as to ensure, as nearly as practicable, that the net asset value per Foresight VCT Share shall be 100 pence and to be implemented by the redesignation of a certain number of Foresight VCT Shares as Deferred Shares and their repurchase by Foresight VCT for a nominal consideration of one penny in aggregate |
| ''Participators'' | all persons having a share or interest in the capital or income of the Keydata Portfolio Companies, including for these purposes (a) a person who possesses, or is entitled to acquire, share capital or voting rights in the Keydata Portfolio Companies, (b) a Loan Creditor of the Keydata Portfolio Companies, (c) a person who possesses a right to receive or participate in distributions of the Keydata Portfolio Companies or any amounts payable by the Keydata Portfolio Companies (in cash or in kind) to Loan Creditors by way of premium on redemption, (d) a person who is entitled to acquire such a right as is mentioned in paragraph (c), and (e) a person who is entitled to secure that income or assets (whether present or future) of the Keydata Portfolio Companies will be applied directly or indirectly for that person's benefit and in all cases treating a person as entitled to do anything which that person is entitled to do at a future date, or will at a future date be entitled to do |
| ''Planned Exit Shares'' | planned exit shares of 1p each in the capital of Foresight VCT (and each a ''Planned Exit Share'') |
| ''Planning Permission'' | the planning permission to build the Derby Project granted by Derby City Council under application number DER/02/08/00261/PRI approved on the 28 July 2008 as it exists as at the date of this document |
|---|---|
| ''Proposals'' | the proposals to effect the merger by way of the Scheme and pass the resolutions to be proposed at the Meetings |
| ''Prospectus'' | the Registration Document published by Foresight VCT on 28 January 2010 and the Summary and Securities Note dated 27 January 2011 |
| ''Record Date'' | the record date to which Shareholders' entitlements will be allocated pursuant to the Scheme, this being 24 February 2011 |
| ''Registration Document'' | the registration document published by Foresight VCT on 28 January 2010 |
| ''Roll-Over Value'' | the value of a Share calculated in accordance with paragraph 4 of Part IV of this document |
| ''Scheme'' | the proposed merger of Keydata 1 and Keydata 2 with Foresight VCT by means of placing Keydata 1 and Keydata 2 into members' voluntary liquidation pursuant to Section 110 of IA 1986 and the acquisition by Foresight VCT of all of Keydata 1 and Keydata 2's assets and liabilities in consideration for Initial New Foresight VCT Shares, and for Additional Consideration as set out in Part IV of this document |
| ''Second General Meetings'' | the second general meetings of Keydata 1 and Keydata 2 to be held on 28 February 2011 |
| ''Shareholder'' | a holder of Shares |
| ''Shares'' | ordinary shares of 1p each in the capital of Keydata 1 and Keydata 2 (and each a ''Share'') |
| ''Spencer'' | Spencer Energy Services Limited |
| ''Summary and Securities Note'' | the summary and securities note issued by Foresight VCT dated 27 January 2011 |
| ''TCGA 1992'' | Taxation of Chargeable Gains Act 1992, as amended |
| ''Transfer Agreement'' | the agreement between Foresight VCT and Keydata 1 and Keydata 2 (acting through the Liquidators) for the transfer of all of the assets |
| and liabilities of Keydata 1 and Keydata 2 by the Liquidators to Foresight VCT pursuant to the Scheme |
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| ''UK'' | the United Kingdom |
| ''UKLA'' or ''UK Listing Authority'' |
the UK Listing Authority, being the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Market Act 2000 |
| ''VCT'' or ''venture capital trust'' |
a company satisfying the requirements of Chapter 3 of Part 6 of ITA 2007 for venture capital trust |
Shareholders and prospective holders of Foresight VCT Shares should consider carefully the following risk factors in addition to the other information presented in this document. If any of the risks described below were to occur, it could have a material effect on Foresight VCT's business, financial condition or results of operations. The risks and uncertainties described below are not the only ones Foresight VCT, the Foresight VCT Board or the holders of Foresight VCT Shares will face. Additional risks not currently known to Foresight VCT or the Foresight VCT Board, or that Foresight VCT or the Foresight VCT Board currently believe are not material, may also adversely affect the Foresight VCT business, financial condition or results of operations. The value of the Foresight VCT Shares could decline due to any of the risk factors described below and holders of Foresight VCT Shares could lose part or all of their investment. Shareholders and prospective holders of Foresight VCT Shares should consult an independent financial adviser authorised under the Financial Services and Markets Act 2000. References to Foresight VCT should be taken as including the Enlarged Company.
Completion of the Proposals is dependent upon a number of conditions precedent being fulfilled, including the approval of Shareholders and the Scheme becoming effective. Whilst the Board has identified a number of potential benefits for the Enlarged Company, there is no certainty that these benefits will lead to improved prospects for the Enlarged Company.
The value of Foresight VCT Shares can fluctuate and holders of Foresight VCT Shares may not get back the amount they invested. In addition, there is no certainty that the market price of Foresight VCT Shares will fully reflect their underlying NAV or that any dividends will be paid, nor should holders of Foresight VCT Shares rely upon any share buy-back policy to offer any certainty of selling their Foresight VCT Shares at prices that reflect the underlying NAV.
Although the existing Foresight VCT Shares have been (and it is anticipated that the Initial New Foresight VCT Shares to be issued pursuant to the Scheme and the Additional New Foresight VCT Shares will be) admitted to the Official List and are (or will be) traded on the London Stock Exchange's market for listed securities, the secondary market for VCT shares is generally illiquid (which may be partly attributable to the fact that initial tax reliefs are not available for VCT shares generally bought in the market and because VCT shares usually trade at a discount to NAV). As a result holders of Foresight VCT Shares may find it difficult to realise their investment. An investment in Foresight VCT should, therefore, be considered as a long-term investment.
The past performance of Keydata 1 and Keydata 2, and Foresight VCT and/or the Foresight Group is no indication of future performance generally or of the value of the Additional Consideration. The return received by holders of Foresight VCT Shares will be dependent on the performance of the underlying investments. The value of such investments, and interest income and dividends therefrom, may rise or fall.
Although Foresight VCT may receive conventional venture capital rights in connection with some of its unquoted investments, as a minority investor it may not be in a position to fully protect its interests.
Foresight VCT's investments (its policy being to invest in private companies and companies traded on AIM and the PLUS-traded or PLUS-quoted markets) may be difficult, and take time, to realise. There may also be constraints imposed on the realisation of investments in order to maintain the VCT tax status of Foresight VCT.
It can take a number of years for the underlying value or quality of the businesses of smaller companies, such as those in which Foresight VCT invests, to be fully reflected in their market values and their market values are often also materially affected by general market sentiment, which can be negative for prolonged periods.
Investment in private companies and companies traded on AIM and PLUS-traded or PLUS-quoted markets, by its nature, involves a higher degree of risk than investment in companies listed on the Official List. In particular, small companies often have limited product lines, markets or financial resources and may be dependent for their management on a small number of key individuals and may be more susceptible to political, exchange rate, taxation and other regulatory changes. In addition, the market for securities in smaller companies is often less liquid than that for securities in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such securities. Proper information for determining the value or the risks to which they are exposed may also not be available. Investment returns will, therefore, be uncertain and involve a higher degree of risk than investment in a company listed on the Official List.
Whilst it is the intention of the Foresight VCT Board that the Enlarged Company will continue to be managed so as to qualify as a VCT, there can be no guarantee that such status will be maintained. Failure to continue to meet the qualifying requirements could result in holders of Foresight VCT Shares losing the tax reliefs available for VCT shares, resulting in adverse tax consequences including, if the holding has not been held for the relevant holding period, a requirement to repay the tax reliefs obtained. Furthermore, should Foresight VCT lose its VCT status, dividends and gains arising on the disposal of Foresight VCT Shares would become subject to tax and Foresight VCT would also lose its exemption from corporation tax on its capital gains.
If a Shareholder disposes of his or her Shares within five years of issue (three years if such Shares were issued on or between 6 April 2004 and 5 April 2006), he or she will be subject to clawback by HMRC of any income tax reliefs originally claimed. For these purposes, the date of issue of the Initial New Foresight VCT Shares and the Additional New Foresight VCT Shares issued pursuant to the Scheme will be the original date of issue of the existing Shares in Keydata 1 and Keydata 2 from which they are derived.
If at any time VCT status is lost for Foresight VCT, dealings in Foresight VCT Shares will normally be suspended until such time as proposals to continue as a VCT or to be wound-up have been announced.
The tax rules, or their interpretation, in relation to an investment in Foresight VCT and/or the rates of tax may change during the life of Keydata 1 and Keydata 2 and may apply retrospectively.
Any purchaser of existing Foresight VCT Shares in the market will not qualify for the then available tax reliefs afforded to subscribers of new VCT shares on the amount invested.
Foresight VCT Shareholders may be adversely affected by the performance of the investments, whether acquired from Keydata 1 and Keydata 2 or made by Foresight VCT. The performance of the investments acquired from Keydata 1 and Keydata 2, as well as the investments of Foresight VCT, may restrict the ability of Foresight VCT following the merger to distribute any capital and revenue gains achieved on the investments transferred from Keydata 1 and Keydata 2 to Foresight VCT (as well as the investments of Foresight VCT). In particular, the Keydata Portfolio Companies represent a significant portion of the assets of Keydata 1 and Keydata 2, and will collectively represent a net asset value approaching 15 per cent. of the Enlarged Company's ordinary share portfolio of investments, the performance of which may affect the performance of the Ordinary Share Fund of the Enlarged Company. Any gains (or losses) made on the investments of Keydata 1 and Keydata 2 will, following the merger with Foresight VCT, be shared amongst the holders of all Foresight VCT Shares (including Initial Foresight VCT New Shares and Additional New Foresight Shares) then in issue. To the extent that such gains or losses do not occur in the same proportions as the Roll-Over Value and the Merger Value, the existing shareholders in Keydata 1 and Keydata 2 or ordinary shareholders of Foresight VCT may gain or lose accordingly.
Shareholders may be adversely affected by a change in the VCT status of Foresight VCT if a number of the investments acquired from Keydata 1 and Keydata 2 or the investments of Foresight VCT, are or become unable to meet VCT requirements.
The VCT Rules require that 70 per cent. of a VCTs investments should be held in companies which satisfy the requirements of Part 4 of Chapter 6 of the ITA 2007. This condition must be satisfied within three years of a VCT raising funds. The Keydata Portfolio Companies have not yet commenced trading and accordingly do not satisfy this requirement. Accordingly, the Companies would be in breach of the VCT Rules, were it not for a series of three month extensions of time for the Keydata Portfolio Companies to commence trading which have been granted by HMRC on the basis of representations made by Foresight Group. The current HMRC three month waiver expires at the end of February 2011 at which point the Keydata Portfolio Companies are not expected to have commenced trading. On expiry further waivers will need to be sought until the Keydata Portfolio Companies are considered to be trading by HMRC. Whilst it is anticipated that a further waiver may be forthcoming, in absence of a permanent solution at some point in the near future, HMRC may exercise their discretion to withdraw their approval of the Companies as VCTs and, if they did, this withdrawal could be on the basis that their original approval should be treated as if it had never been given. In this event the original VCT income tax relief granted to investors could be clawed back by HMRC.
The Companies have the ability to redeem their loans to the Keydata Portfolio Companies, subject to the release by certain other VCTs managed by Foresight Group of fixed and floating charges over the existing assets of the Keydata Portfolio Companies. If this was required, in particular to meet the Companies' operating costs, a repayment of such loans is likely to have an adverse impact on the Keydata Portfolio Companies ability to meet their cash commitments in connection with the Derby Project and, additionally, may result in a dilution of the interest of the Companies in the Keydata Portfolio Companies.
registered in England and Wales with registered numbers 05366736 05366735
Stephen Richard Oxenbridge (Chairman) David Hurst-Brown
Directors: Registered Office:
ECA Court 24-26 South Park Sevenoaks Kent TN13 1DU
27 January 2011
Dear Shareholder,
Recommended Proposals for a merger by way of a Scheme of reconstruction of Keydata 1 and Keydata 2 and cancellation of listing of the Shares of Keydata 1 and Keydata 2
The Board announced on 1 September 2010 that terms for the merger of Keydata 1 and Keydata 2 with Foresight VCT had been agreed.
The purpose of this letter is to set out for Shareholders the terms of agreement and put the Proposals to Shareholders for consideration. The Proposals will, if effected, result in Keydata 1 and Keydata 2 being merged into Foresight VCT creating an Enlarged Company having net assets of over £30 million. This is expected to deliver cost savings and strategic benefits. Following completion of the transaction, Shareholders will become ordinary shareholders in the Enlarged Company.
The merger terms agreed with Foresight VCT will result in all of the assets and liabilities of Keydata 1 and Keydata 2 being transferred to Foresight VCT (subject to the conditions set out in paragraph 8 of Part IV of this document) in consideration for:
The maximum consideration (comprising the Initial New Foresight VCT Shares and the Additional New Foresight VCT Shares) which may be paid by Foresight VCT for the acquisition of the assets of Keydata 1 and Keydata 2 will not exceed £6.4 million, equivalent to 44p per Share.
In addition, as soon as practicable following completion of the merger the Foresight VCT Board intends to offer an enhanced buyback option. In an enhanced buyback, a shareholder is provided with the opportunity to sell shares to the VCT and to subscribe for new shares at the same time, effectively retaining its investment whilst obtaining new VCT income tax relief of up to 30 per cent. of the amount re-subscribed.
Keydata 1 and Keydata 2 were established in February 2005 in order to invest in renewable energy companies concerned with wind, biomass and waste-to-energy power generation. In 2006, we agreed to invest an aggregate of £8 million in ten newly formed wind farm investment companies. Subsequently we were unable to agree satisfactory terms with the operator. The investment manager at that time therefore decided to look for alternative renewable energy investments meeting our requirements.
In June 2007, we announced we had signed agreements to invest up to £12.4 million into seven portfolio companies (Keydata Portfolio Companies). It is intended that each of the operating Keydata Portfolio Companies should pursue different trades, as referred to below. Initially, they agreed on a collaboration in order to focus on renewable biomass combined heat and power generation project in St Helens based on the gasification of waste wood. Progress on the project was frustratingly slow, with a series of technical and implementation problems. In addition, the main engineering contractor had its own financial problems and, when it failed to raise new finance it was decided to withdraw from the project.
In June 2009, Keydata Investment Services Limited (Keydata Investment Services), which handled the administrative affairs of Keydata 1 and Keydata 2 was placed into administration. The enforced liquidation of Keydata Investment Services by the Financial Services Authority during June 2009 coincided with the abandonment of the St Helens project and this delayed the commencement of trading by each of the seven Keydata Portfolio Companies. The commencement of trading by investee companies within three years of a VCT raising funds is one of the qualifying conditions of maintaining VCT status.
Accordingly, the Board acted quickly to appoint Foresight Group as the investment adviser of Keydata 1 and Keydata 2. The Board selected Foresight Group because of its experience in environmental infrastructure, and specifically its involvement in investments in generating heat and power from biomass plants. The Board and Foresight Group instigated a course of action including the termination of all contracts involved with the renewable energy project in St Helens and the removal of the biomass energy assets from the St Helens' site. Keydata 1 and Keydata 2 retained their investment in the Keydata Portfolio Companies and therefore examined all options for the redeployment of the existing equipment owned by the Keydata Portfolio Companies and possibly developing a new project.
Subsequently, one of the Keydata Portfolio Companies, Boyle Electrical Generation Limited (Boyle) agreed a strategic development agreement with O-Gen UK Limited (O-Gen UK), a company in which several venture capital trusts managed by Foresight Group hold an investment and which has particular expertise in the preparation of waste wood material, advanced thermal treatment and gas conditioning. O-Gen UK has recently commissioned a biomass combined heat and power facility in Stoke on Trent which is the first of its type in the UK to secure Ofgem certification.
The strategic development agreement with O-Gen UK is for the development of up to 10MW of energy assets in the Midlands region, with the first facility to be located in Derby (the Derby Project) where planning permission has been secured for the construction of a 3MW biomass plant to redeploy a portion of the Companies' operational assets. It is anticipated that further planning permissions acquired from O-Gen UK will be part of this strategic development.
It is envisaged that the Derby Project will be constructed in three stages. Stage 1 of 0.5MW should be constructed during Q1 2011. Stage 2, which should see an increase in the plant capacity to 1.5MW, should be constructed during Q3 2011 and Stage 3 where the plant will be brought up to full capacity of 3MW should be constructed during Q2 2012. Timely completion of Stage 3 should allow sufficient time for the Derby Project to become fully operational before the Enterprise Value of the Derby Project can be estimated for the purpose of calculating the Additional Consideration to Shareholders as soon as practicable following 30 September 2013.
Foresight Group also applied to HMRC for a waiver of the breach of the VCT rules which occurred because the delay in the commencement of trading by the Keydata Portfolio Companies. In recognition of the fact that this breach of the VCT rules was inadvertent and not the fault of the Companies, the Board or the new manager, HMRC has granted the Keydata VCTs a series of waivers in recognition of the progress now being made by the Keydata Portfolio Companies in satisfying the trading requirement. The latest HMRC waiver covers the period from the end of November 2010 until the end of February 2011.
The Keydata Portfolio Companies, namely Boyle, Burley Energy Limited (Burley), Cooke Generation Limited (Cooke), Nevin Energy Resources Limited (Nevin), Clarke Power Services Limited (Clarke), Spencer Energy Services Limited (Spencer), Hughes Power Limited and Docherty Heat and Energy Distributor Limited, have not yet commenced trading but they are now making good progress towards doing so. Electricity is expected to be produced in the first half of 2011 and each of the operating Keydata Portfolio Companies expects to be revenue generating within the same timescale.
The proposed trades of the Keydata Portfolio Companies continue to be separate, although, they will work alongside each other through their collaboration on the Derby Project. Boyle is the leaseholder for the Derby site responsible for all site related activities and services. It is intended that Boyle will grant sub-licenses to the other Keydata Portfolio Companies. Burley will burn waste wood in a gasifier to create dirty syngas which will be sold to Cooke. Cooke will buy the dirty syngas, clean it and sell it to Nevin. Nevin will run the clean syngas through a reciprocating engine to create electricity. Clarke will provide operational support with external technical advisers and will employ the operations team. Spencer will provide administrative services. The Board believes that the Keydata Portfolio Companies could pursue their trades with unconnected third parties, but following the enforced liquidation of Keydata Investment Services by the Financial Services Authority during June 2009 it was thought that Shareholder value would be best preserved by a continued collaboration between the Keydata Portfolio Companies.
Aside from Clarke and Spencer, each of the Keydata Portfolio Companies owns assets such as gas powered engines, gasification and ancillary equipment that will be utilised within the Derby Project as part of the strategic development agreement and have approximately £2.1 million in aggregate in cash. However, although Keydata 1 and Keydata 2 retain a small proportion of cash (£0.3 million in aggregate) as at 30 September 2010, they cannot provide additional financial resources to the Derby Project and therefore the merger with Foresight will enable the Enlarged Company to support the strategic development agreement fully. Further details of the Companies' investments in the Keydata Portfolio Companies are set out in Part V of this document.
It had been intended that Keydata 1 and Keydata 2 would dispose of a number of the generator assets held by the Keydata Portfolio Companies in order to provide additional financial resources to support their participation in the strategic development agreement. In the event, a professionally managed auction process to sell these assets failed to achieve expected values.
Several of the other VCTs managed by Foresight Group (''the Investing VCTs'') have committed to invest £3 million, in aggregate, towards the completion of the Derby Project alongside the monies in the Keydata Portfolio Companies. Of this commitment, £1.5 million was invested by way of loans and equity securities in the Keydata Portfolio Companies by the Investing VCTs on 23 December 2010 and the balance of the commitment is contingent on the merger taking place. In order to give the Investing VCTs a degree of protection they have taken a first charge on the assets to be purchased with the new loan monies as well as fixed and floating charges on all other assets of the Keydata Portfolio Companies (''the Loan Security''). The equity securities acquired provide the Investing VCTs with 26.2 per cent. of the equity in the Keydata Portfolio Companies.
It was against this background that a merger of Keydata 1 and Keydata 2 with Foresight VCT was considered. A summary of the proposed merger appears below under the heading ''Merger with Foresight VCT''. A combination of the HMRC waiver, the progress of the Keydata Portfolio Companies towards trading and such a merger was thought likely to ensure that the original VCT income tax relief granted to Shareholders will not be clawed back by HMRC and that returns to Shareholders would be maximised.
The Board did consider various other options. These included a winding up of Keydata 1 and Keydata 2 to return cash to Shareholders. However considerable uncertainty surrounded the valuation of the Keydata Portfolio Companies' highly specialised assets. After allowing for costs, the valuations suggested by the auction process would have resulted in Shareholders receiving net cash proceeds of less than 18.0p per Share (before taking into account the costs of liquidation). In addition, a winding up of Keydata 1 and Keydata 2 might have resulted in a loss of the initial income tax relief obtained by Shareholders in respect of their investment in the Companies.
Therefore, following detailed consideration, the Board decided to pursue discussions to merge Keydata 1 and Keydata 2 with Foresight VCT, taking into account the following factors:
On 1 September 2010, the Companies announced that the listings of their Shares had been suspended as at 1 September 2010 as each Company was required to publish their annual financial report for the year ended 30 April 2010 by 31 August 2010. However, as they continued to progress the proposed merger, they announced that they would not be publishing their annual financial reports as required by the Listing Rules. This was done to save the not insignificant costs associated with the production and distribution of financial reports. The Shares were therefore suspended and will remain so until such time as the Companies' Shareholders have voted on the Scheme.
If the Scheme does not complete, the Companies would envisage publishing their annual financial reports as soon as possible following the announcement that the Proposals will not proceed.
The terms of the Scheme set out the method of calculation for the number of Initial New Shares to be issued to Shareholders on the Calculation Date, and subsequently, if applicable, by way of Additional Consideration.
The merger terms agreed with Foresight VCT will result in all of the assets and liabilities of Keydata 1 and Keydata 2 being transferred to Foresight VCT (subject to the conditions set out in paragraph 8 of Part IV of this document) in consideration for:
The maximum consideration (comprising the Initial New Foresight VCT Shares and the Additional New Foresight VCT Shares) which may be paid by Foresight VCT for the acquisition of the assets of Keydata 1 and Keydata 2 will not exceed £6.4 million, equivalent to 44p per share.
The merger will be completed, as regards the initial consideration, on a relative net asset value basis and will be subject to the Scheme becoming unconditional.
As soon as practicable, following completion of the merger the Foresight VCT Board intends to offer an enhanced buyback option. In an enhanced buyback, a shareholder is provided with the opportunity to sell shares to the VCT and to subscribe for new shares at the same time, effectively retaining its investment whilst obtaining new VCT income tax relief of up to 30 per cent. of the amount re-subscribed. HMRC has confirmed that, in accordance with the current VCT Rules and their interpretation, VCT income tax relief would be available on the total amount re-subscribed. Further details of the Enhanced Buyback are set out on page 17 of this document.
As stated in the announcement issued on 1 September 2010, for the purposes of this transaction it has been necessary for the value of the assets owned by Keydata 1 and Keydata 2 to be considered to be made up of two component parts: first, the physical valuation of the Equipment and cash at bank and second, the future Enterprise Value of the Derby Project once the assets owned by the Keydata Portfolio Companies have become operational and are generating electricity.
The value of the Initial New Foresight VCT Shares to Shareholders will therefore be based on the Roll Over Value of the physical assets of Keydata 1 and Keydata 2 at that time. This will be substantially below the asset value of 50.8p announced on 30 October 2009 but this was the only basis on which the Foresight VCT Board was prepared to proceed with a merger.
Additional Consideration is payable to Shareholders in the form of Additional New Foresight VCT Shares after 30 September 2013 if at that date the Enterprise Value of the Derby Project exceeds the Roll Over Value. The maximum consideration which may be paid by Foresight VCT for the acquisition of the assets of Keydata 1 and Keydata 2 will not exceed £6.4 million. In addition, the Proposals should ensure that the tax relief obtained by Shareholders in respect of their investment in the Companies will be preserved.
The Foresight VCT Board believes that this structure is necessary to recognise the execution risks that Foresight VCT will be assuming as a consequence of the proposed merger and the current and potential value of the assets of Keydata 1 and Keydata 2. Foresight VCT is committed to support the development of the Keydata Portfolio Companies. The existing investment management arrangements between Foresight Group and Foresight VCT will remain in place.
Notwithstanding the disappointing reduction in the asset value to be received by Shareholders at the outset relative to net asset values announced in October 2009, the Board considers that this merger is in the best interest of both groups of shareholders on the basis that the merger provides:
Annual running costs attributable to the Ordinary Share Fund of Foresight VCT and to Keydata 1 and Keydata 2 are approximately £717,000, £188,000 and £188,000 respectively (ignoring the current annual cost cap of 3.5 per cent. of the NAV for Keydata 1 and Keydata 2 as this would not apply in the Enlarged Company). This represents 3.7 per cent. of the unaudited NAV attributable to the Foresight VCT Shares at 30 June 2010 and 5.2 per cent. of Keydata 1 and 5.2 per cent of Keydata 2's unaudited NAV at 30 November 2009. After the merger the annual running costs are expected to be £885,000, a saving of £208,000 and reducing the combined annual running costs by 0.8 per cent. to approximately 3.3 per cent. of the net assets of the Foresight VCT Shares of the Enlarged Company.
The aggregate anticipated cost of undertaking the merger is approximately £300,000, including VAT, legal and professional fees, stamp duty and the costs of winding up Keydata 1 and Keydata 2.
On 21 January 2011 the Companies announced an update to the merger discussions with Foresight VCT. The following is extracted from that announcement:
''In recognition of both the current physical valuation and future operational value of these assets, Foresight has proposed that the proceeds of the merger for the Keydata VCTs' shareholders should be satisfied in two tranches:
The Boards of the Keydata VCTs anticipate that, if the plant is operationally successful, the value of the additional consideration will compensate Keydata VCTs shareholders for the difference between the physical valuation of the assets at the time of merger and the net asset value of their shares in Keydata VCTs at that time (less merger costs).
The maximum consideration comprising the initial consideration and the additional consideration which may be paid by Foresight for the acquisition of the assets of the Keydata VCTs will not exceed £6.4 million, equivalent to 44p per Keydata VCT share.
The Boards of the Keydata VCTs believe that the above structure takes account of the current and potential value of the assets of the Keydata VCTs and recognises the execution risks that Foresight will be assuming as a consequence of the proposed merger.''
In addition as at 30 June 2010, the Companies had in aggregate cash and overnight deposits of £424,000, creditors of £558,000 and net current liabilities of £134,000 as extracted from the Companies unaudited management accounts as at 30 June 2010.
The Scheme for the merger provides for Keydata 1 and Keydata 2 to be put into members' voluntary liquidation and for all of their assets and liabilities to be transferred to Foresight VCT in exchange for Initial New Foresight VCT Shares.
Following the transfer, the listing of the Shares in Keydata 1 and Keydata 2 will be cancelled and Keydata 1 and Keydata 2 will be wound up.
The Board believes that the Scheme provides an efficient way of effecting a merger with an acceptable level of costs compared with other merger routes. Shareholders should note that the merger will be outside the provisions of the City Code on Takeovers and Mergers.
The Scheme is conditional upon the approval by the shareholders of Keydata 1 and Keydata 2 and Foresight VCT of resolutions to be proposed at the Meetings and the Foresight Meetings and the other conditions set out in paragraph 8 of Part IV of this document.
The Liquidators will offer to purchase the holdings of dissenting Shareholders at the break value price for the Shares, this being an estimate of the amount a Shareholder would receive for Shares in an ordinary winding-up of Keydata 1 and Keydata 2 if all of the assets of Keydata 1 and Keydata 2 had to be realised. The break-value is expected to be significantly below the estimated Roll-Over Value. Accordingly, the effect of dissenting Shareholders will be both to reduce the overall number of Initial New Foresight VCT Shares to be issued (reflecting the reduction in the value of the assets to be transferred to Foresight VCT by the payment of the break value price) as well as to increase the number of Initial New Foresight VCT Shares to be issued to those Shareholders who vote in favour of the Scheme at the expense of those Shareholders who dissent.
Had the Scheme been implemented on 30 June 2010 the unaudited NAV at that date of Keydata 1 and Keydata 2 (taken from the Keydata management accounts) and taking into account a reduced valuation of the Equipment to £2,365,000 by the Foresight VCT Board in connection with the merger and including a reduction for amounts paid or accrued for the costs of the Scheme to be borne by the Companies would have been £3.8 million and the Roll-Over Value per Share (this being the unaudited NAV of the Shares as at 30 June 2010 (taking into account that reduced valuation and including the aforementioned reductions), and divided by the number of Shares in issue), would have been 26.2p (assuming no dissenting Shareholders).
Had the Scheme been implemented on 30 June 2010, the unaudited NAV at that date of the Ordinary Share Fund of Foresight VCT (taken from the unaudited interim accounts of Foresight VCT) was £22.6 million and the Foresight VCT Merger Value per Foresight VCT Share (this being the unaudited NAV of the Foresight VCT Shares as at 30 June 2010 divided by the number of Foresight VCT Shares in issue) would have been 47.3p.
The number of Initial New Foresight VCT Shares to be issued to Shareholders will be calculated by multiplying the number of Shares in issue by the ratio of the Roll-Over Value per Share divided by the Merger Value per Foresight VCT Share. Such Initial New Foresight VCT Shares will be issued pro-rata to Shareholders on the register of members of each of Keydata 1 and Keydata 2 on the Record Date. For these purposes dissenting shareholders in Keydata 1 and Keydata 2 will be disregarded. Shareholders who do not vote in favour of the resolution to be proposed at the First General Meeting are entitled to dissent as set out in paragraph 10 of Part IV of this document.
Further information regarding the terms of the Scheme is set out in Part IV of this document.
Had the Scheme been implemented on 30 June 2010, based on the relative unaudited net asset values of Foresight VCT and the Companies as at that day, 8,090,614 Initial New Foresight VCT Shares would have been issued to Shareholders representing 14.49 per cent. of the enlarged issued Foresight VCT share capital as at 30 June 2010.
Foresight VCT was launched in 1997 and has an objective of achieving long-term capital appreciation and generating maintainable levels of income for shareholders. As at 30 June 2010, the Ordinary Share Fund of Foresight VCT had unaudited net assets of £22.6 million or (47.3p per Foresight VCT Share) and investments in 26 companies with a valuation of £21.0 million. In addition to the Ordinary Share Fund of Foresight VCT, Foresight VCT established a new fund in 2010, raising capital by the issue of a new class of shares called Planned Exit Shares. The capital raised by the issue of Planned Exit Shares, investments made from that capital and the investment returns derived therefrom are and will remain exclusively attributable to the holders of the Planned Exit Shares.
The original holders of Foresight VCT Shares, since 1997, have received total dividends of 169.4p (restated) per Foresight VCT Share as well as retaining 32.5p (restated) per share of remaining net asset value, making a net asset value total return of over 200p per share. This makes the original ordinary shares of Foresight VCT, shares in the best performing VCT fund launched. Over the six months to 30 June 2010 the underlying net asset value increased by 19 per cent. due to the improved revenue and profit performance of a number of portfolio companies, a significant amount of which can be attributed to export driven growth in the US and Europe.
Further details relating to Foresight VCT are set out in Part VI of this document.
Keydata 1 and Keydata 2 will apply to the UKLA for cancellation of the listing of their Shares, upon the successful completion of the Scheme, which is anticipated to be on 1 March 2011.
As soon as practicable following completion of the Scheme and the Ordinary Share Reconstruction, Foresight VCT intends to make available the opportunity for its ordinary shareholders including existing Shareholders in Keydata 1 and Keydata 2 to participate in the Enhanced Buyback. In an enhanced buyback, a shareholder is provided with the opportunity to sell shares back to his VCT and to subscribe for new shares at the same time, effectively retaining his investment whilst obtaining new VCT income tax relief of up to 30 per cent. of the amount re-subscribed. HMRC has confirmed that, in accordance with the current VCT Rules and their interpretation, VCT income tax relief would be available on the total amount re-subscribed.
The Enhanced Buyback will not be suitable for all Shareholders. In particular, Shareholders who own Shares purchased since 6 April 2006 will lose any ''front end'' income tax relief which they have obtained if they sell them in the Enhanced Buyback. Ex shareholders of Keydata 1 and Keydata 2 who hold Initial New Foresight VCT Shares acquired pursuant to the Scheme will not lose their ''front end'' income tax relief if they sell them under the Enhanced Buyback provided they acquired their Shares in Keydata 1 and Keydata 2 before 6 April 2006. Shareholders in the Companies should consult with their professional tax advisers as to whether they should participate in the Enhanced Buyback.
Shareholders of the Enlarged Company will receive further documentation in connection with the Enhanced Buyback following completion of the merger. This documentation will allow Shareholders of the Enlarged Company to take part in the Enhanced Buyback if they so wish.
The following paragraphs and Part VII of this document apply to persons holding Shares (or, as the case may be Initial New Foresight VCT Shares) as an investment in Keydata 1 and Keydata 2 (and subsequently in Foresight VCT) who are the absolute beneficial owners of such Shares (or, as the case may be, Initial New Foresight VCT Shares) and are resident in the UK. They may not apply to certain classes of persons such as dealers in securities. The following information and that contained in Part VII of this document is based on current UK law and practice, is subject to changes therein, is given by way of general summary and does not constitute legal or tax advice. Any Shareholder in doubt about their position, or who might be subject to tax in a jurisdiction other than the UK, should consult their independent financial adviser.
As is more fully explained in Part VII of this document, the receipt by Shareholders of Initial New Foresight VCT Shares should not constitute a disposal of their Shares in Keydata 1 and Keydata 2 for UK capital gains tax purposes. Shareholders should, for UK tax purposes, effectively be able to treat the Initial New Foresight VCT Shares received pursuant to the Scheme as if they had been acquired at the date of and at the price of the original Shares in Keydata 1 and Keydata 2. As Foresight VCT is also a VCT, the usual VCT tax reliefs should continue to apply.
Further details as to the taxation consequences for Shareholders are detailed in Part VII of this document. Shareholders should note that tax clearances have been obtained as is more particularly described in Part VII of this document.
Notices of the Meetings are set out at the end of this document. The First General Meetings will be held at Over-Seas House, Park Place, St James's Street, London SW1A 1LR and the Second General Meetings will be held ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU as follows;
All resolutions will be proposed as special resolutions requiring the approval of at least 75 per cent. of the votes cast on that resolution at the meeting.
The resolution to be proposed at the First General Meetings will seek Shareholder approval for the Scheme and authorise its implementation by the Liquidators.
The resolution to be proposed at the Second General Meetings will seek the following:
Paragraph 1.1 of the resolution will seek approval to put Keydata 1 and Keydata 2 into liquidation and appoint and remunerate the Liquidators for the purposes of such winding-up.
Paragraph 1.2 of the resolution will authorise the Liquidators to exercise certain powers for which the express sanction of Shareholders is required under the IA 1986, such as paying classes of creditors in full.
Paragraph 1.3 of the resolution will approve the cancellation of the listing of Keydata 1 and Keydata 2's Shares following the successful completion of the Scheme.
The above resolution will be proposed as a special resolution requiring the approval of 75 per cent. of the votes cast at the Meetings.
Provided that a Shareholder does not vote in favour of the resolution to be proposed at a First General Meeting, such a Shareholder may within 7 days following that First General Meeting express his/her dissent to the Liquidators in writing at the registered office of (as appropriate) Keydata 1 and Keydata 2 and require the Liquidators to purchase that Shareholder's holding in (as appropriate) Keydata 1 or Keydata 2. The Liquidators will offer to purchase the holdings of dissenting Shareholders at the break value price per Share, this being an estimate of the amount a Shareholder would receive per Share in an ordinary winding up of (as appropriate) Keydata 1 and Keydata 2 if all the assets of (as appropriate) Keydata 1 and Keydata 2 had to be realised. The break value is expected to be significantly below the estimated Roll-Over Value. Further details on the taxation consequences for Shareholders are set out in Part VII of this document.
If the Merger does not proceed, in the opinion of the Board there are two requirements that would now be required before the current suspension of the listing of the Companies' Shares is lifted.
First, with effect from 28 September 2010, recent changes to the Listing Rules require VCTs to be managed by boards where a majority of the directors are independent, as a director cannot be regarded as independent if he is a director of two VCTs managed by the same investment manager. As the merger discussions had already commenced and the listing of the Shares was suspended at the time this rule became applicable for the Companies the Board has not been restructured and consequently the Companies do not currently comply with this Listing Rule. If the merger does not complete, the Board will endeavour to recruit additional directors in order that this Listing Rule is complied with. If the merger completes, the Companies will be liquidated and the need for additional directors falls away.
Second, before the suspension of the Shares is lifted both Companies would have to publish their annual financial report as soon as possible following the announcement that the proposals will not proceed. If the merger completes, the need for the Companies to publish their annual financial report falls away.
The Board believes that merger is a critical step towards the completion of the Derby Project which, in the opinion of the Board, represents the best option to maximise the future returns for Keydata Shareholders and to preserve VCT income tax relief.
Several of the other VCTs managed by Foresight Group (''the Investing VCTs'') have committed to invest £3 million, in aggregate, towards the completion of the Derby Project alongside the monies in the Keydata Portfolio Companies. Of this commitment, £1.5 million was invested by way of loans and equity securities in the Keydata Portfolio Companies by the Investing VCTs on 23 December 2010 and the balance of the commitment is contingent on the merger taking place. The balance of the commitment is needed for the Keydata Portfolio Companies to commence trading profitably. In order to give the Investing VCTs a degree of protection they have taken a first charge on the assets to be purchased with the new loan monies as well as fixed and floating charges on the majority of other assets of the Keydata Portfolio Companies (''the Loan Security''). The equity securities acquired provide the Investing VCTs with 26.2 per cent. of the equity in the Keydata Portfolio Companies.
Although the Board has considered alternative options, in the Board's opinion the merger is much more likely to maximise the current and future returns for Shareholders.
Additionally, but crucially, the Derby Project currently underpins the progress which the Keydata Portfolio Companies are making towards the commencement of trading.
If the merger does not proceed, the Board believes, given that the Keydata Portfolio Companies have not yet reached trading status along with the risk of a claw back of tax relief, that it would be difficult for the Companies to attempt to raise additional finance.
In the absence of the merger or the ability to raise additional finance, the Companies would be able to trade on for a while but the most likely alternative would be to seek a sale of the assets held by the Keydata Portfolio Companies and the return of capital to Shareholders. An asset sale would require the consent of the Investing VCTs pursuant to the terms of the Loan Security granted to the Investing VCTs.
No discussions have been had with HMRC in relation to the alternative option of an asset sale. The pursuit of alternative options may not be granted an HMRC waiver, which could result in the original VCT income tax relief granted to Shareholders being clawed back by HMRC.
As noted above, to comply with the Listing Rules, if the merger did not proceed the Board would need to incur the cost associated with the recruitment of additional directors to ensure Board independence, as well as the publication of the Companies' annual financial reports. The aggregate cash resources of approximately £2.1 million within the Keydata Portfolio Companies may also be reduced through the potential repayment of loans to Keydata 1 and Keydata 2 if required to meet ongoing operating costs, albeit any repayment of loans may not be required in the next six to twelve months. However, if at some point the repayment of loans is required, it would be likely to have an adverse impact in the Keydata Portfolio Companies' ability to meet their cash commitments in connection with the Derby Project which may result in a dilution of the Companies' interest in the Keydata Portfolio Companies. This would probably lead to the Companies seeking to sell their assets and return cash to Shareholders, if this had not already been pursued by then. The need to obtain a release from the Loan Security may increase the dilution of their interest in the Keydata Portfolio Companies.
If Shareholders do not vote in favour of the Scheme the following adverse consequences may arise:
A loss of original VCT income tax relief for Shareholders if HMRC do not grant a further waiver at the end of February 2011. A merger with Foresight VCT preserves VCT income tax relief in any event.
A loss of value to Shareholders if the Keydata Portfolio Companies are required to repay loans or sell assets and obtain a release from the Loan Security and this results in a dilution of the interest of the Companies in the Keydata Portfolio Companies.
A loss of value to Shareholders if a sale of the assets in the Keydata Portfolio Companies can be achieved only at additional expense and at the cost of agreeing to lower valuations of the Equipment. Given the current economic climate and the considerable uncertainty surrounding the valuation of the highly specialised assets of the Keydata Portfolio Companies the Board is unable to estimate what this loss of value might be, though believes that it could be significant.
A loss of value to Shareholders as a result of the additional costs and expense of complying with the Listing Rules as well as in pursuing alternative courses of action such as the sale of the assets held by the Keydata Portfolio Companies.
Accordingly, if Shareholders do not vote in favour of the Scheme, the Board believes that this will result in a significant loss in value to Shareholders and may also result in a loss of VCT income tax relief and a resulting cash liability to pay the income tax which then becomes due in the absence of such relief.
Therefore, the Board believes strongly that the merger is essential for the protection of Shareholders' interests and recommends that Shareholders vote in favour of the resolutions in order that the merger can proceed.
Shareholders will find forms of proxy attached at the end of this document for the Meetings. Whether or not you propose to attend the Meetings, you are requested to complete and return each appropriate form of proxy attached so as to be received not less than 48 hours before the time appointed for holding the relevant meeting. Completion and return of the forms of proxy will not prevent a Shareholder from attending and voting in person at the relevant meeting should a Shareholder wish to do so.
The Board, which has been advised by Opus Corporate Finance LLP, believe that the Proposals are in the best interests of the Shareholders as a whole and unanimously recommend you to vote in favour of the resolutions to be proposed at the Meetings as they intend to do in respect of their own holdings of Shares representing approximately 0.2 per cent. of the issued Share capital of Keydata 1 and approximately 0.2 per cent. of the issued Share capital of Keydata 2.
Yours faithfully
Stephen Oxenbridge (Chairman)
The definitions set out in Part I of this document shall have the same meanings when used in the context of this Part IV.
On or immediately prior to the Calculation Date, Foresight Group (on the instruction of the Liquidators) shall calculate the Roll-Over Value and the Merger Values in accordance with paragraph 4 below.
On the Effective Date, the Liquidators shall receive all the cash, undertakings and other assets and liabilities of Keydata 1 and Keydata 2 and shall deliver to Foresight VCT:
On the Effective Date, the Liquidators (on behalf of Keydata 1 and Keydata 2) and Foresight VCT will enter into the Transfer Agreement (subject to such modifications as may be agreed between the parties thereto) pursuant to which the Liquidators will procure the transfer of all of the assets and liabilities of Keydata 1 and Keydata 2 to Foresight VCT in exchange for the issue of Initial New Foresight VCT Shares (fully paid) to Shareholders on the basis set out in paragraph 4 below together with the right of Shareholders to receive Additional Consideration by way of an issue of Additional New Foresight VCT Shares if, as at 30 September 2013, the Enterprise Value of the Derby Project exceeds the Roll Over Value of the Shares on merger. The maximum consideration which may be paid by Foresight VCT for the acquisition of the assets of Keydata 1 and Keydata 2 will not exceed £6.4 million.
Foresight VCT will, pursuant to the Transfer Agreement, undertake to pay all liabilities incurred by the Liquidators including but not limited to the implementation of the Scheme, the winding up of Keydata 1 and Keydata 2 and the purchase for cash of any holdings of dissenting Shareholders which liabilities should be taken into account when calculating the Roll-Over Value.
Except as otherwise provided for in these Scheme terms, for the purposes of calculating the Roll-Over Value, the Merger Value, the number of Initial New Foresight VCT Shares and the Additional Consideration Foresight VCT Shares to be issued, the following provisions will apply:
The Roll-Over Value for each of Keydata 1 and Keydata 2 will be calculated separately and references to ''Keydata'' and ''Shares'' in the formula below shall mean: (i) ''Keydata 1'' and ''Keydata 1 Shares'' when calculating the Roll-Over Value for Keydata 1, and shall mean (ii) ''Keydata 2'' and ''Keydata 2 Shares'' when calculating the Roll-Over Value for Keydata 2.
The Roll-Over Value (''R'') will be calculated as:
$$
\frac{(A - B - C) - (D + E)}{F}
$$
Where:
*Any unutilized part of the contingency sum of £10,000 will be added to the Enterprise Value of the Derby Project.
The Merger Value will be calculated as follows:
$$
\frac{G+H+I}{J}
$$
Where:
The number of Initial New Foresight VCT Shares (excluding the Additional New Foresight VCT Shares) to be issued to Shareholders (save for any dissenting Shareholders) will be calculated as follows:
$$
(\frac{R}{M})\; x\; F
$$
Where:
R = the Roll-Over Value;
M = the Merger Value; and
F = as above, the number of Shares in issue as at close of business on the Record Date (save for any Shares held by dissenting Shareholders).
The Initial New Foresight VCT Shares to be issued pursuant to the Scheme will be issued directly to Shareholders (save for any dissenting Shareholders) pro rata to their existing holdings on instruction of the Liquidators.
Following the issue of Initial New Foresight VCT Shares and after the close of business on 28 February 2011 Foresight VCT will reconstruct its ordinary share capital by the rateable redesignation of a proportion of the Foresight VCT Shares then in issue (including the Initial New Foresight VCT Shares) as Deferred Shares carrying rights which render the Deferred Shares of a nominal value only and the immediate repurchase by Foresight VCT of the Deferred Shares for a nominal consideration of one penny in aggregate. The number of issued Foresight VCT Shares to be so redesignated and repurchased shall be such as to ensure, as nearly as practicable, that the net asset value per share of the remaining Foresight VCT Shares shall be 100 pence.
Entitlements will be rounded down to the nearest whole number and any fractional entitlements (which will not exceed £5) will be sold in the market and the proceeds retained for the benefit of Foresight VCT.
Initial New Foresight VCT Shares will be issued in registered form. Foresight VCT Shares are eligible for electronic settlement and can be held within the CREST system. If, following issue, recipients of Initial New Foresight VCT Shares pursuant to the Scheme should wish to hold their Initial New Foresight VCT Shares in uncertificated form they should contact their broker or independent financial adviser.
Under the terms of the Scheme, unless Shareholders advise otherwise, dividend payment mandates provided for Shares will be transferred to the Initial New Foresight VCT Shares.
Application will be made to the UKLA for the Initial New Foresight VCT Shares to be listed on the Official List and will be made to the London Stock Exchange for such Initial New Foresight VCT Shares to be admitted to trading on its market for listed securities. The Initial New Foresight VCT Shares will rank pari passu with the existing issued Foresight VCT Shares from the date of issue.
As soon as practicable following 30 September 2013 Foresight VCT will announce to Shareholders the Enterprise Value of the Derby Project (excluding, for the avoidance of doubt, any assets, liabilities, revenues and profits attributable to businesses purchased or commenced by the Keydata Portfolio Companies after the merger).
If the Shareholder Percentage of the Enterprise Value of the Derby Project expressed on a per Share basis exceeds the Roll Over Value of the Shares then Additional Consideration (by way of the issue of Additional New Foresight VCT Shares) shall be due to Shareholders at the rate of one pence for every one pence by which that excess is greater than the Roll Over Value of the Shares. The maximum consideration which may be paid by Foresight VCT for the acquisition of the assets of Keydata 1 and Keydata 2 (by way of the issue of Initial New Foresight VCT Shares to Shareholders equal in value to the aggregate Roll Over value of the Keydata Shares plus the issue of Additional New Foresight VCT Shares) will not exceed £6.4 million.
The Shareholder Percentage of the Enterprise Value of the Derby Project (''SEV'') will be calculated by multiplying the Enterprise Value of the Derby Project by the same percentage of the Derby Project to which Foresight VCT would be entitled, if the Keydata Portfolio Companies were to be liquidated following the close of business on 30 September 2013 and the Derby Project distributed in specie to all Participators in accordance with their rights, pursuant to the rights which Foresight VCT enjoys as the holder of the investments in the Keydata Portfolio Companies which it acquires pursuant to the Transfer Agreement subject to the SEV Adjustment (as defined below).
The Shareholder Percentage of the Enterprise Value of the Derby Project expressed on a per Share basis (''SEVps'') will be calculated by Foresight VCT as follows:
$$
\left(\frac{SEV}{F}\right)
$$
where
The Additional Consideration will be satisfied by the issue to Shareholders of a number of Additional New Foresight VCT Shares to be calculated by Foresight VCT as follows:
''SEV Adjustment''; the amount of the SEV shall be reduced by the amount of any actual or contingent liability of Keydata 1 and Keydata 2 after the Record date.
$$
\left(\frac{SEVps}{FV}\right)x F
$$
where:
The Additional New Foresight VCT Shares to be issued pursuant to the Scheme will be issued directly to Shareholders (save for any dissenting Shareholders) pro rata to their existing holdings on instruction of the Liquidators. Entitlements will be rounded down to the nearest whole number and any fractional entitlements (which will not exceed £5) will be sold in the market and the proceeds retained for the benefit of Foresight VCT.
Application will be made to the UKLA for the Additional New Foresight VCT Shares to be listed on the Official List and will be made to the London Stock Exchange for the Additional New Foresight VCT Shares to be admitted to trading on its market for listed securities following the agreement of the Additional Consideration. In addition, the issue of the additional New Shares will only be made pursuant to the Listing Rules at that time. The Additional New Foresight VCT Shares will rank pari passu with the existing issued Foresight VCT Shares from the date of issue.
The provisions of the Scheme shall have effect subject to such non-material modifications or additions as the parties to the Transfer Agreement may from time to time approve in writing.
The Liquidators and Foresight VCT shall be entitled to act and rely, without enquiry, on any information furnished or made available to them or any of them, as the case may be, in connection with the Scheme and the Transfer Agreement including, for the avoidance of doubt, any certificate, opinion, advice, valuation, evidence or other information furnished or made available to them by Keydata 1 and Keydata 2, Foresight VCT, the Board or the Foresight VCT Board (or any individual director of Keydata 1 and Keydata 2 and Foresight VCT), Foresight Group, the registrar or the bankers of Keydata 1 and Keydata 2 and Foresight VCT or its or their other professional advisers and the Liquidators shall not be liable or responsible for any loss suffered as a result thereof.
Nothing in the Scheme or in any document executed under or in connection with the Scheme shall impose any personal liability on the Liquidators or either of them save for any liability arising out of any negligence, breach of duty or wilful default by the Liquidators in the performance of their duties and this shall, for the avoidance of doubt, exclude any such liability for any action taken by the Liquidators in accordance with the Scheme or the Transfer Agreement.
The Scheme is conditional upon:
Subject to the above, the Scheme shall become effective immediately after the passing of the special resolutions for the winding up of Keydata 1 and Keydata 2 to be proposed at the Second General Meeting. If it becomes effective, the Scheme shall be binding on all Shareholders and all persons claiming through or under them.
If the conditions set out above have not been satisfied by 31 March 2011; the Scheme shall not become effective. The Board will then review all options available to them regarding the future of Keydata 1 and Keydata 2.
Shareholders will receive new share certificates in respect of the Initial New Foresight VCT Shares issued pursuant to the Scheme.
Had the Scheme been implemented on 30 June 2010 the unaudited NAV at that date of Keydata 1 and Keydata 2 (taken from the Keydata unaudited management accounts) and taking into account a reduced valuation of the Equipment to £2,365,000 by the Foresight Boardin connection with themerger andincluding a reduction for amounts paid or accrued for the costs of the Scheme to be borne by the Companies would have been £3.8 million and the Roll-Over Value per Share (this being the unaudited NAV of the Shares as at 30 June 2010 (taking into account the reduced valuation and including the aforementioned reduction), and divided by the number of Shares in issue), would have been 26.2p (assuming no dissenting Shareholders).
Had the Scheme been implemented on 30 June 2010, the unaudited NAV at that date of Foresight VCT relating to the Ordinary Shares (taken from the unaudited interim accounts of Foresight VCT) was £22.6 million and the Foresight VCT Merger Value per Foresight VCT Ordinary Share (this being the unaudited NAV of the Foresight VCT Ordinary Shares as at 30 June 2010 divided by the number of Foresight VCT Ordinary Shares in issue) would have been 47.3p.
The number of Initial New Foresight VCT Shares to be issued to Shareholders will be calculated by multiplying the number of Shares in issue by the ratio of the Roll-Over Value per Share divided by the Merger Value per Foresight VCT Share. Such Initial New Foresight VCT Shares will be issued pro-rata to Shareholders on the register of members of each of Keydata 1 and Keydata 2 on the Record Date. For these purposes dissenting shareholders in Keydata 1 and Keydata 2 will be disregarded.
Provided that a Shareholder does not vote in favour of the resolution to be proposed at the First General Meetings, such Shareholder may within 7 days following the First General Meetings express his/her dissent to the Liquidators in writing at the registered office of the Company and require the Liquidators to purchase that Shareholder's holding in the Company.
The Liquidators will offer to purchase the holdings of dissenting Shareholders at the break value price per Share, this being an estimate of the amount a Shareholder would receive per Share in an ordinary winding-up of Keydata 1 and Keydata 2 if all of the assets of Keydata 1 and Keydata 2 had to be realised. The break value is expected to be significantly below the estimated Roll-Over Value. Further details on the taxation consequences for Shareholders are set out in Part VII of this document.
The Scheme shall, in all respects, be governed by and construed in accordance with the laws of England and Wales.
Keydata 1 and Keydata 2 continue to retain their investments in the Keydata Portfolio Companies, namely Boyle Electrical Generation Limited, Burley Energy Limited, Cooke Generation Limited, Nevin Energy Resources Limited, Clarke Power Services Limited, Spencer Energy Services Limited, Hughes Power Limited and Docherty Heat and Energy Distributor Limited.
The Keydata Portfolio Companies have not yet commenced trading. Their proposed trades, as agreed with HMRC, are as follows:
| Overview of key trades of each Keydata Portfolio Company | |||
|---|---|---|---|
| Investee companies | Main trade | ||
| Boyle Electrical Generation Limited | Leaseholder for the Derby site - responsible for all site related activities and services |
||
| Burley Energy Limited | Energy company 1 - burns waste wood in a gasifier to create dirty syngas, sold onto Cooke Generation Limited |
||
| Cooke Generation Limited | Energy Company 2 - buys the dirty syngas produced by Burley Energy Limited, cleans it and sells it onto Nevin Energy Resources Limited |
||
| Nevin Energy Resources Limited | Energy Company 3 - buys the clean syngas from Cooke and runs it through a reciprocating engine to create electricity |
||
| Clarke Power Services Limited | Provides operational support - contracts with the external technical advisers and employs the operations team |
||
| Spencer Energy Services Limited | Provides administrative support such as company secretarial, financial administration for management accounts etc |
||
| Hughes Power Limited | To be wound up/struck off. Assets and liabilities to be acquired by Nevin Energy Resources Limited |
||
| Docherty Heat and Energy Distributor Limited |
Holding company |
It would be possible for each of the Keydata Portfolio Companies to carry out their proposed trades with external parties unconnected with the Derby Project as currently envisaged as part of the merger negotiations with Foresight VCT. If the merger with Foresight VCT was not approved by Shareholders, then, with the object of spreading risk for Shareholders, Keydata 1 and Keydata 2 would need to raise additional capital to provide the finance which the Keydata Portfolio Companies would need in order to pursue more broadly based business plans.
Foresight VCT was launched in 1997 as a public limited company listed on the Official List.
Foresight VCT has met the requirement for VCTs pursuant to Chapter 3 of Part 6 ITA 2007 and intends to carry on its activities so as to continue qualifying as a VCT.
The directors of Foresight VCT are:
John Gregory;
Peter Dicks;
Antony Diment; and
Gordon Humphries.
Biographies for the directors of Foresight VCT can be found in Part II of the Foresight VCT Summary and Securities Note which accompanies this document.
The investment manager to Foresight VCT is Foresight Group, the same investment manager as for Keydata 1 and Keydata 2.
Foresight Group is an investment manager with substantial experience in identifying, investing in, monitoring and subsequently exiting from companies of the size and type qualifying for VCT investment.
Further details relating to Foresight Group are set out in Part III of the Foresight VCT Summary and Securities Note which accompanies this document.
The objective of Foresight VCT is to target UK unquoted companies which Foresight VCT believes will achieve the objective of producing attractive returns for its shareholders.
Foresight VCT invests in a range of securities including, but not limited to, ordinary and preference shares, loan stocks, convertible securities, and fixed-interest securities as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stocks, while AIM investments are primarily held in ordinary shares. Pending investment in qualifying unquoted and AIM and PLUS-traded or PLUS-quoted market securities, cash will be held in interest bearing money market open ended investment companies (OEICs) as well as a range of non-qualifying investments.
Investments are primarily made in companies which are based in the UK, although many will trade overseas. The companies in which investments are made must have no more than £7 million of gross assets at the time of investment (or £15 million if the funds being invested were raised before 5 April 2006) to be classed as a VCT qualifying holding.
Foresight VCT aims to be at least significantly invested in growth businesses subject always to the quality of investment opportunities and the timing of realisations. Any uninvested funds are held in cash, interest bearing securities and a range of non-qualifying investments. It is intended that the significant majority of any funds raised by Foresight VCT will be invested in VCT qualifying investments.
Risk is spread by investing in a number of different businesses within different industry sectors using a mixture of securities. The maximum amount invested in any one company is limited to 15 per cent. of the portfolio at the time of investment.
Investments are selected in the expectation that the application of private equity disciplines including an active management style for unquoted companies through the placement of an investor director on investee company boards will enhance value.
Further details on the investment policy for the Enlarged Company are set out in Part II of the Foresight VCT Prospectus which accompanies this document.
As at 30 June 2010, Foresight VCT had 26 investments with an aggregate value of over £21,084,536 and unaudited net assets of £28,438,000 (47.3p per Foresight VCT Share). At that date, Foresight VCT had six AIM listed investments, valued at £4,158,278.
Foresight VCT has paid dividends amounting to 169.4p per Foresight VCT Share (equivalent) since incorporation to date.
Foresight VCT has two classes of share, ordinary shares of 1p each and Planned Exit Shares of 1p each. Further information regarding the Planned Exit Shares is contained in the Summary and Securities Note which accompanies this document.
Foresight VCT has shareholder authority to buy back shares. In determining whether it is appropriate to buy back Foresight VCT Shares for cancellation, the Foresight VCT Board has to bear in mind the interests of Foresight VCT as a whole. These considerations will include the fact that the portfolio is fully invested and that it will be in Foresight VCT's continued long term interest to use the proceeds of sales to make new investments in order to revitalise and diversify the portfolio.
Any such repurchases will be made in accordance with guidelines established by the Foresight VCT Board from time to time and will be subject to Foresight VCT having the appropriate authorities from its shareholders and sufficient funds available for this purpose.
Foresight VCT Share buybacks will also be subject to the Listing Rules and any applicable law at the relevant time. Foresight VCT Shares bought back in the market will ordinarily be cancelled.
Investment management and secretarial fees payable to Foresight Group in respect of the total assets less adjusted liabilities, attributable to the Foresight VCT Shares are calculated and charged on the following basis:
Foresight Group is also entitled to subscribe at par for such number of Foresight VCT Shares as represents 15 per cent. (at the then prevailing net asset value per Foresight VCT Ordinary Share adjusted to take into account the relevant dividend to be paid) of the aggregate of each (revenue or capital) distribution paid to the holders of Foresight VCT Shares. Foresight VCT Shares will only be issued if the Total Return per Foresight VCT Share amounts to at least 100p per Foresight VCT Share immediately before the relevant dividend is paid and after the issue of such Foresight VCT Shares. For these purposes ''Total Return'' shall mean the aggregate of: (i) the then NAV of Foresight VCT Shares; (ii) an amount equal to 10.75p; and (iii) all distributions following that date per Foresight VCT Share. Any such performance fee would be calculated each time a distribution is declared and any Foresight VCT Shares to be allotted would be issued on the date the distribution is made to Shareholders (or as soon as practicable thereafter). Foresight Group's entitlement shall cease or be reduced on a sliding scale depending on the nature of a termination or resignation of Foresight Group's appointment.
These arrangements will continue to apply to the Enlarged Company following the merger. Accordingly, Foresight Group will receive an investment management fee of 2 per cent. on the enlarged asset base of the Enlarged Company. Foresight Group will also be entitled to subscribe at par for Foresight VCT Shares on the basis described above.
The estimated annual expenses of the Enlarged Company are expected to be approximately 3.3 per cent. of the net asset value of the Enlarged Company. The combined cost savings are only one of the benefits of a merger as set out on pages 14 and 15.
The accounting reference date of Foresight VCT is 31 December and annual accounts are usually dispatched in April each year with interim accounts for the six month period to the end of June being usually dispatched in August each year. The auditors of Foresight VCT are Ernst & Young.
The most recent unaudited NAV and share price per Foresight VCT Share is available on the website of the London Stock Exchange.
As a VCT, Foresight VCT is not subject to UK taxation on capital gains on the disposals of its investments. Foresight VCT will, however, be subject to UK taxation on income at the usual rates.
Qualifying shareholders of Foresight VCT will not be liable to UK taxation on dividends paid on Foresight VCT Shares or capital gains on the disposals of such shares (although such disposal will trigger the payment of any capital gains tax deferred on subscription).
Further details relating to Foresight VCT are set out in the Prospectus.
The following paragraphs apply to Keydata 1 and Keydata 2 and to persons holding Shares as an investment in Keydata 1 and Keydata 2 who are the absolute beneficial owners of such Shares (or, as the case may be, Foresight VCT Shares) and are resident in the UK. They may not apply to certain classes of persons, such as dealers in securities. The following information is based on current UK law and practice, is subject to changes therein, is given by way of general summary and does not constitute legal or tax advice.
The tax reliefs set out below are available to individuals aged 18 or over who receive Foresight VCT Shares under the Scheme.
Keydata 1 and Keydata 2 have each obtained provisional approval as a VCT under Chapter 3 of Part 6 of ITA 2007.
In 2006, Keydata 1 and Keydata 2 agreed to invest an aggregate of £8 million in ten newly formed wind farm investment companies. Subsequently Keydata 1 and Keydata 2 were unable to agree satisfactory terms with the operator. The investment manager, Keydata Investment Services Limited, therefore decided to look for alternative renewable energy investment opportunities for Keydata 1 and Keydata 2.
In June 2007, Keydata 1 and Keydata 2 announced they had signed agreements to invest up to £12.4 million in a renewable biomass combined heat and power generation project in St Helens based on the gasification of waste wood. Progress on the project was frustratingly slow, with a series of technical and implementation problems. In addition, the main engineering contractor had its own financial problems and, when it failed to raise new finance it was decided to withdraw from the project.
In June 2009 Keydata Investment Services Limited, who handled the administrative affairs of Keydata 1 and Keydata 2 was placed into administration. Foresight Group was appointed as the investment adviser of Keydata 1 and Keydata 2 at this time. The Board selected Foresight Group because of its experience in environmental infrastructure, and specifically its involvement in investments in generating heat and power from biomass plants. The Board and Foresight Group instigated a course of action including the termination of all contracts involved with the renewable energy project in St Helens and the removal of all of the biomass energy assets from the St Helens' site.
More recently, the Board agreed a strategic development agreement with O-Gen UK, a company in which several venture capital trusts managed by Foresight Group hold an investment. O-Gen UK has particular expertise in the preparation of waste wood material, planning and advanced thermal treatment and gas conditioning and has commissioned a biomass combined heat and power facility in Stoke which is the first of its type in the UK to secure Ofgem certification.
The strategic development agreement with O-Gen UK is for the development of up to 10MW of energy assets in the Midlands region over the next 3 years, with the first facility to be located in Derby (the Derby Project) where planning permission has been secured for the construction of biomass plants to redeploy a portion of Keydata's operational assets. It is anticipated that further planning permissions acquired from O-Gen UK will be part of this strategic development.
The Companies would be in breach of the VCT Rules, were it not for a series of three month extensions of time for the Keydata Portfolio Companies to commence trading which have been granted by HMRC on the basis of representations made by Foresight Group. The current HMRC three month waiver expires at the end of February 2011 by which time, if the Scheme is approved by Shareholders, the Companies will be in liquidation and Shareholders (other than dissenting Shareholders) will hold Initial New Foresight VCT Shares to which their original VCT income tax relief will transfer.
If the Scheme is not approved, whilst it is anticipated that a further waiver would be forthcoming, in the absence of a permanent solution at some point in the near future, HMRC may exercise their discretion to withdraw their approval of the Companies as VCTs and, if they did, this withdrawal could be on the basis that their original approval should be treated as if it had never been given. In this event the original VCT income tax relief granted to investors could be clawed back by HMRC.
Furthermore, the proposed method of winding up Keydata 1 and Keydata 2 is such that the benefit of VCT status should be available to the Liquidators, to the extent that the Liquidators effect disposals of chargeable assets for the purpose of UK taxation of capital gains to implement the Scheme.
HMRC have confirmed that the effective exchange of existing Shares in Keydata 1 and Keydata 2 for Initial New Foresight VCT Shares and Additional New Foresight VCT Shares should not constitute a disposal of the existing Shares for the purposes of UK taxation. Instead, the new holding of Foresight VCT Shares should be treated as having been acquired at the same time and at the same cost as the existing Shares in Keydata 1 and Keydata 2 from which they are derived. Any capital gains tax deferral relief obtained on subscription of the existing Shares in Keydata 1 and Keydata 2 should not, therefore, be crystallised for payment but will be transferred to the Initial New Foresight VCT Shares.
For Shareholders holding (together with their associates) more than five per cent. of Keydata 1 Shares and Keydata 2 Shares in issue, clearance has been obtained from HMRC in terms of Section 138 of TCGA 1992 that the treatment described above for persons who (together with their associates) own less than five per cent. of the Shares in Keydata 1 and Keydata 2 should also apply to them.
Shareholders in Foresight VCT, as a VCT, should be afforded the usual tax reliefs available to shareholders in VCTs. Qualifying shareholders should continue to receive tax-free dividends and should not be subject to UK taxation on any capital gains on the disposal of Foresight VCT Shares.
No UK stamp duty will be payable by Shareholders as a result of the implementation of the Scheme.
Dissenting Shareholders' holdings will be purchased for cash at the 'break value', which will be an estimate of the amount a Shareholder would receive in an ordinary winding-up of Keydata 1 and Keydata 2 if all the assets of Keydata 1 and Keydata 2 had to be realised. The break value is expected to be significantly below the estimated Roll-Over Value.
Dissenting Shareholders whose Keydata 1 Shares and Keydata 2 Shares are purchased shall be treated as having disposed of their existing Keydata 1 Shares and Keydata 2 Shares. Keydata 1 and Keydata 2 will still be able to claim the benefit of VCT status whilst in liquidation under the Merger Regulations and the dissenting Keydata Shareholders will not be subject to any UK taxation in respect of any capital gains arising on disposal under the Scheme.
Clearance has been obtained from HMRC in respect of the Scheme under Section 701 ITA 2007 and Section 138 TCGA 1992. With regard to the former, the receipt of Initial New Foresight VCT Shares should not, except in the case of dealers, fall to be regarded as an income receipt for the purposes of UK taxation.
Clearance has also been obtained from HMRC that the Scheme meets the requirements of the Merger Regulations and as such the receipt by Shareholders of Initial New Foresight VCT Shares Additional New Foresight VCT Shares should not prejudice tax reliefs obtained by Shareholders on existing Shares in Keydata 1 and Keydata 2 and should not be regarded as a disposal.
The Directors, whose names appear in paragraph 3 below, accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
2.1 As at 26 January 2011 (this being the latest practicable date prior to the publication of this document), the authorised and issued share capital of Keydata 1 and Keydata 2 was as follows:
| Issued and fully paid | ||
|---|---|---|
| No. of Shares | £ | |
| Keydata 1 Shares (1p each) | 7,306,320 | 73,063.20 |
| Keydata 2 Shares (1p each) | 7,306,320 | 73,063.20 |
2.2 As at 26 January 2011 (this being the latest practicable date prior to the publication of this document), no share or loan capital of Keydata 1 and Keydata 2 was under option or had been agreed, conditionally or unconditionally, to be put under option, nor did Keydata 1 and Keydata 2 hold any share capital in treasury.
all of ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU (the registered office of Keydata 1 and Keydata 2). The principal place of business of Keydata 1 and Keydata 2 is at ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU.
3.2 As at 26 January 2011 (this being the latest practicable date prior to publication of this document), the interests of the Directors (and their immediate families), in the issued share capital of Keydata 1 and Keydata 2 were as follows:
| Keydata 2 | % of Share capital of |
||
|---|---|---|---|
| Keydata 1 | Shares | each | |
| Director | Shares | Number | Company |
| Stephen Richard Oxenbridge | 2,000 | 2,000 | 0.03 |
| David Hurst-Brown | 12,500 | 12,500 | 0.17 |
3.5 No Director is or has been interested in any transaction which is or was unusual in its nature or conditions or significant to the business of Keydata 1 and Keydata 2 and which was effected by Keydata 1 and Keydata 2 in the years ended 28 February 2007, 2008 and 2009, in the period ended 30 April 2010 or in the current financial year or which was effected in an earlier financial year and remains in any respect outstanding or unperformed.
As at close of business on 26 January 2011 (this being the latest practicable date prior to publication of this document), Keydata 1 and Keydata 2 is not aware of any person who, directly or indirectly, has an interest in Keydata 1 and Keydata 2's capital or voting rights which is notifiable under UK law (under which, pursuant to CA 2006 and the Listing Rules and the Disclosure of Transparency Rules of the FSA, a holding of 3 per cent. or more must be notified to Keydata 1 and Keydata 2).
The appointment is for a fixed period to 10 June 2013, thereafter on 12 months notice. The appointment may also be terminated in circumstances of material breach by either party.
Foresight Group is entitled to a fee, payable quarterly, of 0.4 per cent. per quarter of the total gross assets less gross liabilities of Keydata 1 and Keydata 2 at the previous quarter end.
The Investment Manager acts as custodian of Keydata 1 and Keydata 2's unquoted assets pursuant to this agreement and is not entitled to borrow on behalf of Keydata 1 and Keydata 2 without the prior approval of the Board.
The issue of Foresight VCT Shares to persons resident in or citizens of jurisdictions outside the UK may be affected by the laws of the relevant jurisdiction. Such Shareholders should inform themselves about and observe any legal requirements, in particular:
It is the responsibility of Shareholders with registered addresses outside the UK to satisfy themselves as to the observance of the laws of the relevant jurisdiction in connection with the issue of Foresight VCT Shares, including the obtaining of any governmental or exchange control or other consents which may be required, the compliance with any other necessary formalities which need to be observed and the payment of any issue, transfer or other taxes or duties due in such jurisdiction.
Copies of the following documents will be available for inspection during normal business hours on any day (Saturdays, Sundays and public holidays excepted) from the date of this document until the Effective Date at the offices of R W Blears LLP at 125 Old Broad Street, London EC2N 1AR and also at the registered office of Keydata 1 and Keydata 2:
8.2 the audited report and accounts of Keydata 1 and Keydata 2 for the financial years ended 29 February 2008, and 28 February 2009;
8.3 the unaudited interim report of Keydata 1 and Keydata 2 for the six month period ended 31 August 2009;
(Registered in England and Wales with registered number 05366736)
Notice is hereby given that a general meeting of Keydata Income VCT 1 plc (''Keydata 1'') will be held at 10.00 am on 18 February 2011 at Over-Seas House, Park Place, St James's Street, London SW1A 1LR for the purposes of considering and, if thought fit, passing the following resolution, which will be proposed as a special resolution:
That, subject to the conditions (other than the passing of this resolution) set out in paragraph 8 of Part IV of the circular to the shareholders of Keydata 1 and Keydata Income VCT 2 plc dated 27 January 2011 (a copy of which is produced to the meeting and initialed for the purpose of identification by the chairman of the meeting (''Circular'') having been fulfilled and notwithstanding anything in the articles of association of Keydata 1 to the contrary, the Scheme, as defined and set out in Part IV of the Circular, be and hereby is approved and the Directors and Ian Schofield and Charles Escott both of PKF (UK) LLP, Farringdon Place, 20 Farringdon Road, London EC1M 3AP (''the Liquidators'') be and they are hereby authorised (insofar as they are not already authorised by the articles of association of Keydata 1) to implement the Scheme and to execute any document and do any act or thing for the purpose of carrying the Scheme into effect and, in particular (but without prejudice to the foregoing generality):
and for the purposes of the resolution, words and expressions defined in the Circular shall have the same meanings in this resolution, save where the context requires otherwise.
Dated 27 January 2011
Registered Office: ECA Court 24-26 South Park Sevenoaks Kent TN13 1DU
By order of the Board
(Registered in England and Wales with registered number 05366736)
Notice is hereby given that a general meeting of Keydata Income VCT 1 plc (''Keydata 1) will be held at 10.00 am on 28 February 2011 at ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU for the purposes of considering and, if thought fit, passing the following resolution, which will be proposed as a special resolution:
That:
Dated 27 January 2011
Registered Office: ECA Court 24-26 South Park Sevenoaks Kent TN13 1DU
By order of the Board
(Registered in England and Wales with registered number 05366736)
Notice is hereby given that a general meeting of Keydata Income VCT 2 plc (''Keydata 2'') will be held at 10.05 am on 18 February 2011 or so soon thereafter as the earlier general meetings of Keydata Income VCT 1 plc shall have concluded at Over-Seas House, Park Place, St James's Street, London SW1A 1LR for the purposes of considering and, if thought fit, passing the following resolution, which will be proposed as a special resolution:
That, subject to the conditions (other than the passing of this resolution) set out in paragraph 8 of Part IV of the circular to the shareholders of Keydata Income VCT 1 plc and Keydata 2 dated 27 January 2011 (a copy of which is produced to the meeting and initialed for the purpose of identification by the chairman of the meeting (''Circular'')) having been fulfilled and notwithstanding anything in the articles of association of Keydata 2 to the contrary, the Scheme, as defined and set out in Part IV of the Circular, be and hereby is approved and the Directors and Ian Schofield and Charles Escott both of PKF (UK) LLP, Farringdon Place, 20 Farringdon Road, London EC1M 3AP (''the Liquidators'') be and they are hereby authorised (insofar as they are not already authorised by the articles of association of Keydata 2) to implement the Scheme and to execute any document and do any act or thing for the purpose of carrying the Scheme into effect and, in particular (but without prejudice to the foregoing generality):
and for the purposes of the resolution, words and expressions defined in the Circular shall have the same meanings in this resolution, save where the context requires otherwise.
Dated 27 January 2011
Registered Office: ECA Court 24-26 South Park Sevenoaks Kent TN13 1DU
By order of the Board
(Registered in England and Wales with registered number 05366736)
Notice is hereby given that a general meeting of Keydata Income VCT 2 plc (''Keydata 2'') will be held at 10.05 am on 28 February 2011 or so soon thereafter as the earlier general meetings of Keydata Income VCT 1 plc shall have concluded at ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU for the purposes of considering and, if thought fit, passing the following resolution, which will be proposed as a special resolution:
That:
Dated 27 January 2011
Registered Office: ECA Court 24-26 South Park Sevenoaks Kent TN13 1DU
By order of the Board
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