Proxy Solicitation & Information Statement • Jun 28, 2013
Proxy Solicitation & Information Statement
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets Act 2000 without delay. Shareholders should also carefully consider the risk factors set out on pages 3 to 6 of this document.
If you have sold or otherwise transferred all your Shares in ProVen Health VCT plc, please send this document, together with the accompanying forms of proxy, as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for onward transmission to the purchaser or transferee. However, the distribution of this document and any accompanying documents into jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this document and any accompanying documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of securities laws of any such jurisdiction. Shareholders (including, without limitation, nominees, trustees or custodians) who would, or otherwise intend to, forward this document and the accompanying documents outside the United Kingdom should read the section headed "Overseas Shareholders" in paragraph 5 of Part 2 of this document.
(Incorporated in England and Wales with registered number 04131354)
Your attention is drawn to the letter from the Chairman of ProVen Health VCT plc in Part 1 of this document, which contains the recommendation of the Board that Shareholders vote in favour of the resolutions to be proposed at the meetings referred to below.
This document should be read in conjunction with the accompanying Prospectus published by ProVen Growth and Income VCT plc.
Your attention is drawn to pages 3 to 6 of this document, which summarise the risk factors associated with the Proposals. However, you should read this document in its entirety before deciding what action you should take.
Notices convening general meetings of ProVen Health VCT plc, to be held at 10.00 a.m. on 26 July 2013 and 10.00 a.m. on 6 August 2013, to approve the Proposals and to place the Company into members' voluntary liquidation, are set out on pages 37 to 42 of this document. Both meetings will be held at the offices of Beringea LLP, 39 Earlham Street, London WC2H 9LT. Forms of proxy for use at these meetings accompany this document (BLUE for the First General Meeting and GREEN for the Second General Meeting). To be valid, the relevant form of proxy must be completed and returned so as to be received by Beringea LLP, 39 Earlham Street, London WC2H 9LT, not later than 10.00 a.m. on 24 July 2013, in the case of the form of proxy for use at the First General Meeting, and not later than 10.00 a.m. on 2 August 2013, in the case of the form of proxy for use at the Second General Meeting.
Your attention is drawn to the section entitled "Action to be taken" on page 14 of this document.
| Page | |
|---|---|
| RISK FACTORS | 3 |
| ACTION TO BE TAKEN BY SHAREHOLDERS | 7 |
| EXPECTED TIMETABLE | 8 |
| PART 1 – LETTER FROM THE CHAIRMAN | 9 |
| PART 2 – FURTHER DETAILS OF THE PROPOSALS | 15 |
| PART 3 – THE SCHEME | 17 |
| PART 4 – PROVEN GROWTH AND INCOME VCT PLC | 23 |
| PART 5 – TAXATION | 27 |
| PART 6 – GENERAL INFORMATION | 29 |
| DEFINITIONS | 33 |
| NOTICE OF FIRST GENERAL MEETING | 37 |
| NOTICE OF SECOND GENERAL MEETING | 40 |
The risks referred to in this section are the material risks known to the Directors at the date of this document which the Directors believe Shareholders should consider prior to deciding how to cast their votes on the Resolutions. Shareholders who are in any doubt about the action they should take should consult their stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets Act 2000 without delay.
Details of ProVen Growth & Income VCT are set out in Part 4 of this document. Full details of ProVen Growth & Income VCT and the risks associated with an investment in ProVen Growth & Income VCT Shares are set out in the Prospectus. Shareholders are strongly advised to read the whole of the Prospectus and, in particular, the risk factors set out on pages 13 to 16 of that document before voting on the Resolutions.
Implementation of the Scheme is conditional, inter alia, upon the Resolutions being passed at the General Meetings (full details of the conditions of the Scheme are set out in paragraph 11 of Part 3 of this document). If any of the conditions of the Scheme are not met, the Scheme will not be implemented, Shareholders will not receive New ProVen Growth & Income VCT Shares and Shareholders will remain invested in a VCT with a less diversified portfolio of VCT qualifying investments and therefore greater portfolio risk across a narrower range of investments and businesses. If the Scheme is not implemented certain costs and expenses incurred in connection with the Scheme (estimated to be in the region of £95,000 (including VAT)) will also be borne by the Company. In these circumstances, the Company would continue as a separate VCT and the Board would reassess the options available to the Company. The Board may, in this event, consider formulating new proposals for the merger of the Company with another VCT which would be likely to result in additional costs being incurred by the Company. There is, however, no certainty that the Board would be able to identify a suitable and willing merger partner or as to the terms of any such alternative merger proposal.
For the purposes of the Proposals, and in order to enable the Company's net assets to be transferred to ProVen Growth & Income VCT, the assets and liabilities of the Company and ProVen Growth & Income VCT are expected to be valued as at close of business on 2 August 2013 (which will be the Calculation Date for the purposes of the Proposals). The Company's assets will be transferred to ProVen Growth & Income VCT as soon as practicable following the Effective Date, which is expected to be 6 August 2013. It is not expected that the value of the Company's or ProVen Growth & Income VCTs assets or liabilities will change significantly between the Calculation Date and the Effective Date. However, movements in the value of the Company's and/or ProVen Growth & Income VCT's assets or liabilities after the Calculation Date will not be taken into account when calculating the entitlements of Shareholders under the Scheme.
Representations in this document concerning the taxation of Shareholders are based on current law and practice, which are subject to change. The information in this document relating to taxation law and practice is given by way of general summary and does not constitute legal or tax advice to Shareholders.
The Board has been advised that the Proposals should be treated as a scheme of reconstruction for the purposes of UK taxation of capital gains. Clearance has been granted by HMRC under section 138 of the TCGA that section 136 of the TCGA will not be prevented from applying to the Scheme by virtue of section 137 of the TCGA. HMRC has also advised that no notices under section 698 of the Income Tax Act 2007 or section 733 of the Corporation Tax Act 2010 (cancellation of tax advantages from certain transactions in securities) ought to be given in respect of the Proposals.
If the Proposals are implemented, Shareholders will receive ProVen Growth & Income VCT Shares in respect of their Shares. Full details of ProVen Growth & Income VCT and the rights attaching to the ProVen Growth & Income VCT Shares are contained in the Prospectus.
If the Scheme becomes effective, Shareholders will receive New ProVen Growth & Income VCT Shares and gain exposure to ProVen Growth & Income VCT's investment portfolio. In order to comply with VCT legislation, ProVen Growth & Income VCT (in common with other VCTs including the Company) will invest a proportion of the cash acquired from the Company pursuant to the Scheme in smaller and unquoted companies. Investment in smaller and unquoted companies involves a higher degree of risk than investment in larger companies and those traded on the Main Market of the London Stock Exchange. Smaller companies generally may have limited product lines, markets or financial resources and may be more dependent on their management or key individuals than larger companies. Prices of smaller capitalisation stocks are often more volatile than prices of larger capitalisation stocks and the risk of bankruptcy of many smaller companies (with the attendant losses to investors) is higher. In certain circumstances, particularly in times of economic slowdown or recession, smaller companies may be more likely to reduce or stop paying dividends or otherwise returning funds to investors (which could reduce the income received by ProVen Growth & Income VCT and impact its ability to pay dividends).
Although ProVen Growth & Income VCT may agree conventional venture capital rights in connection with some of its investments, as a minority investor it may not be in a position to fully protect its interests. Markets for smaller companies' securities may be less regulated and are often less liquid, and this may cause difficulties in valuing and disposing of equity investments in such companies. Realisation of investments in unquoted companies can be difficult and may take considerable time.
The profitability of the businesses of ProVen Growth & Income VCT's portfolio companies could be impacted by business conditions and adverse economic conditions. Factors such as unemployment levels, the levels and volatility of equity markets, consumer confidence, interest rates and inflation could significantly affect the market for products or services of portfolio companies. A difficult economic climate may adversely affect the prospects for both existing portfolio companies and any new investments.
The Company's investment objective is to provide investors with an attractive return through a stream of tax free dividend distributions from the capital gains and income generated from a diversified portfolio of investments in small and medium sized companies. Similarly, ProVen Growth & Income VCT's investment objective is to provide investors with long-term returns greater than those available from direct investment in quoted businesses by investing in a portfolio of carefully selected smaller companies with excellent growth prospects. There can be no guarantee that the investment objective of ProVen Growth & Income VCT will be met. Meeting its objective is a target but the existence of such an objective should not be considered as an assurance or guarantee that it will be met (as this will depend on the performance of and returns generated by portfolio companies). If ProVen Growth & Income VCT does not meet its investment objective the returns made to ProVen Growth & Income VCT Shareholders may go down. The value of an investment in ProVen Growth & Income VCT may go down as well as up and investors may not get back the full value attributed to their Shares under the Scheme.
Both the Company and ProVen Growth & Income VCT currently seek to achieve their investment objectives by investing in: (i) a portfolio of carefully selected qualifying investments in small and medium sized unquoted companies; and (ii) a portfolio of non-qualifying investments including cash, liquidity funds, fixed interest securities and non-qualifying venture capital investments. The Company currently holds nonqualifying investments of approximately £2.9 million in cash and cash equivalent funds and ProVen Growth & Income VCT holds non-qualifying investments of approximately £25.7 million in cash. Although such investments in cash and cash equivalent funds generate low levels of income they are relatively secure investments. At the ProVen Growth & Income VCT General Meeting, a resolution will be proposed to approve the adoption of an amended investment policy of ProVen Growth & Income VCT to allow it to make non-qualifying investments in debt and debt-related securities of growth companies. The Scheme is not conditional on the passing of this resolution.
Although investments in debt and debt-related securities of growth companies are expected to generate higher yields for ProVen Growth & Income VCT they are higher risk than investments in cash and cash equivalent funds. Investments in debt and debt-related securities of growth companies are subject to credit risks. Adverse changes in the financial position of an issuer or in general economic conditions may impair the ability of the issuer to make payments of principal and interest or may cause the liquidation or insolvency of an issuer. ProVen Growth & Income VCT may realise a higher current yield than the yield offered by cash holdings or holdings of cash equivalent investments, but investment in debt and debtrelated securities of growth companies involves a greater volatility of price and a greater risk of default by the issuers of such securities, with consequent loss of interest payment and principal. A lack of liquidity in such debtsecurities may make it difficult for ProVen Growth & Income VCT to sell those securities at or near their purported value.
At any given point in time, the price for a ProVen Growth & Income VCT Share which a shareholder could achieve on the stock market may be significantly less than the Net Asset Value of a share or the issue price of that share under the Scheme. The ProVen Growth & Income VCT Shares may trade at a discount to their Net Asset Value for a variety of reasons, including as a consequence of general market conditions, concerns regarding the general liquidity or marketability of the ProVen Growth & Income VCT Shares or the actual or expected performance of ProVen Growth & Income VCT. As such, Shareholders may only be able to realise their New ProVen Growth & Income VCT Shares at a discount to their underlying Net Asset Value (as may also be the case in respect of their existing Shares).
ProVen Growth & Income VCT is a closed-ended company. Shareholders will have no right to have their ProVen Growth & Income VCT Shares redeemed or repurchased by ProVen Growth & Income VCT at any time. If the Scheme is implemented, Shareholders wishing to realise their new investment in ProVen Growth & Income VCT will be required to dispose of their ProVen Growth & Income VCT Shares on the stock market. Accordingly, the ability of Shareholders to realise the Net Asset Value of, or any value in respect of, their ProVen Growth & Income VCT Shares will be dependent on the existence of a liquid market in the ProVen Growth & Income VCT Shares and the market price of such ProVen Growth & Income VCT Shares.
Although the existing ProVen Growth & Income VCT Shares have been (and it is anticipated that the New ProVen Growth & Income VCT Shares will be) admitted to the premium segment of the Official List of the UK Listing Authority and traded on the London Stock Exchange's main market for listed securities, it is unlikely that there will be a liquid market for the ProVen Growth & Income VCT Shares as there is a limited secondary market for VCT shares. This is primarily because initial VCT income tax relief is only available to individuals subscribing for newly issued shares. As a result, Shareholders receiving New ProVen Growth & Income VCT Shares under the Scheme may find it difficult to sell any such shares in the future.
It is the intention of the ProVen Growth & Income VCT Directors that ProVen Growth & Income VCT will buy back shares from its shareholders where they trade at a discount of approximately 10 per cent. to their underlying Net Asset Value. There can, however, be no guarantee that ProVen Growth & Income VCT will buy back its shares from its shareholders or that if it does so the discount to NAV will not be greater. Share buybacks will be subject to applicable legislation and VCT regulations and the availability of sufficient reserves and cash in ProVen Growth & Income VCT. The number of shares bought back by ProVen Growth & Income VCT over a period of 12 months will be less than 10 per cent. of the number of ProVen Growth & Income VCT Shares in issue. As such, Shareholders wishing to sell New ProVen Growth & Income VCT Shares acquired under the terms of the Scheme back to ProVen Growth & Income VCT will not necessarily be able to do so.
The information, including tax rules, contained in this document is based on existing legislation. The tax rules or their interpretation in relation to an investment in ProVen Growth & Income VCT and/or the rates of tax, or other statutory provisions to which ProVen Growth & Income VCT is subject, may change during the life of ProVen Growth & Income VCT and such changes could be retrospective. If an investor who subscribes for ProVen Growth & Income VCT Shares disposes of those ProVen Growth & Income VCT Shares within five years of the date of investment, the investor is likely to be subject to claw back by HMRC of any income tax relief originally obtained on subscription (with New ProVen Growth & Income VCT Shares acquired under the Scheme treated as if they had been subscribed for at the time of subscription for their original shares). While it is the intention of the ProVen Growth & Income VCT Directors that ProVen Growth & Income VCT will be managed so as to continue to qualify as a VCT, there can be no guarantee that this status will be maintained. A failure to meet the qualifying requirements could result in the loss of tax reliefs previously obtained, resulting in adverse tax consequences for investors, including a requirement to repay the income tax relief obtained, and could also cause ProVen Growth & Income VCT to lose its exemption from corporation tax on capital gains.
ProVen Growth & Income VCT will only pay dividends to holders of ProVen Growth & Income VCT Shares to the extent that it has sufficient cash and reserves available for that purpose and subject to any requirement to retain funds to remain at an economically viable size. A reduction of income from ProVen Growth & Income VCT's portfolio would adversely affect the ability of ProVen Growth & Income VCT to pay dividends on the ProVen Growth & Income VCT Shares.
Any change in the tax treatment of dividends paid or income received by ProVen Growth & Income VCT may reduce the dividends paid to the holders of ProVen Growth & Income VCT Shares. A reduction of income from ProVen Growth & Income VCT's investments would adversely affect the yield on the ProVen Growth & Income VCT Shares. Such a reduction could arise, for example, from lower rates of dividend paid on investments, reductions in loan stock interest payments by investee companies or difficulties realising gains on portfolio investments.
The past performance of Beringea, the investment manager of ProVen Growth & Income VCT, and other assets managed by Beringea are not guides to the future performance of ProVen Growth & Income VCT.
There can be no guarantee that Beringea will remain as the investment manager of ProVen Growth & Income VCT. Beringea ceasing to act as investment manager of ProVen Growth & Income VCT may have an adverse effect on the performance of ProVen Growth & Income VCT. ProVen Growth & Income VCT has no employees and is dependent on the skills and experience of Beringea to manage its investments. If key personnel cease to remain with Beringea or be involved in the management of ProVen Growth & Income VCT's portfolio, there is no assurance that suitable replacements will be found. If this occurs there may be an adverse effect on the performance of ProVen Growth & Income VCT and the value of the ProVen Growth & Income VCT Shares.
Enclosed with this document are two forms of proxy for use by Shareholders: BLUE for the First General Meeting (to be held at 10.00 a.m. on 26 July 2013) and GREEN for the Second General Meeting (to be held at 10.00 a.m. on 6 August 2013).
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or attend and vote at the relevant General Meeting in person.
Forms of proxy must be received by Beringea no later than 10.00 a.m. on 24 July 2013, in the case of forms of proxy for use at the First General Meeting, and no later than 10.00 a.m. on 2 August 2013, in the case of forms of proxy for use at the Second General Meeting.
Full details of the action to be taken by Shareholders are set out in the paragraph headed "Action to be taken" on page 14 of Part 1 of this document and in the instructions on the forms of proxy. The attention of Overseas Shareholders is drawn to the sections headed "Overseas Shareholders" in paragraph 5 of Part 2 of this document.
If you have any queries in relation to your shareholding(s) in the Company, please call the Registrar on 0870 707 1657. The Registrar can only provide information regarding your shareholding; it cannot provide you with investment, tax or legal advice.
| 2013 | |
|---|---|
| Record date for the Interim Dividend | 5 July |
| Latest time and date for receipt of BLUE forms of proxy for the First General Meeting of ProVen Health |
10.00 a.m. on 24 July |
| Payment date for the Interim Dividend | 25 July |
| First General Meeting of ProVen Health | 10.00 a.m. on 26 July |
| Time and date from which it is advised that dealings in Shares should only be for cash settlement and immediate delivery of documents of title |
8.00 a.m. on 30 July |
| ProVen Growth & Income VCT General Meeting | 3.00 p.m. on 30 July |
| Shares disabled in CREST | 7.30 a.m. on 31 July |
| Latest time and date for receipt of GREEN forms of proxy for the Second General Meeting of ProVen Health |
10.00 a.m. on 2 August |
| Calculation Date | close of business on 2 August |
| Record Date for Shareholders' entitlements under the Scheme | 6.00 p.m. on 2 August |
| Dealings in Shares suspended | 7.30 a.m. on 6 August |
| Second General Meeting of ProVen Health | 10.00 a.m. on 6 August |
| Effective Date for implementation of the Scheme and commencement of the liquidation of the Company |
6 August |
| Admission to listing and dealings commence in the New ProVen Growth & Income VCT Shares issued pursuant to the Scheme |
8.00 a.m. on 7 August |
| New ProVen Growth & Income VCT Shares issued in uncertificated form credited to CREST accounts of Shareholders under the Scheme |
8.00 a.m. on 7 August |
| Cancellation of listing of Shares from the premium segment of the Official List and trading on the main market of the London Stock Exchange |
8.00 a.m. on 7 August |
| Share and tax certificates in respect of New ProVen Growth & Income VCT Shares issued in certificated form pursuant to the Scheme despatched to Shareholders entitled thereto |
week commencing 19 August |
Notes:
(1) For the avoidance of doubt, the Register will remain open until the Effective Date.
(2) Each of the times and dates in the above expected timetable (other than in relation to the General Meetings) may be extended or brought forward without further notice. If any of the above times and/or dates changes, the revised time(s) and/or date(s) will be notified to Shareholders by an announcement through a Regulatory Information Service provider.
(Incorporated in England and Wales with registered number 04131354)
Charles Pinney (Chairman) 39 Earlham Street Peter Arthur London Frank Harding WC2H 9LT Diane James
Directors: Registered office:
27 June 2013
Dear Shareholder,
As announced today, the Company has reached agreement with ProVen Growth & Income VCT in respect of a recommended merger pursuant to a scheme of reconstruction and winding up of the Company under section 110 of the Insolvency Act 1986. ProVen Growth & Income VCT is a venture capital trust which was launched in 2001 and is also managed by the Company's investment manager, Beringea.
The Scheme, further details of which are set out in this document, will allow Shareholders to continue their investment in a VCT (and retain the upfront VCT income tax relief they obtained on subscription for their Shares). This document explains the effects of the Proposals, which are conditional on, among other matters, the approval of Shareholders at the General Meetings of the Company to be held on 26 July 2013 and 6 August 2013.
The Board considers the Proposals to be in the interests of Shareholders as a whole and recommends that Shareholders vote in favour of the Resolutions required to implement the Proposals at the General Meetings. Notices of the General Meetings are set out at the end of this document.
In the event that either of the Resolutions is not passed or any other condition of the Proposals is not met, the Proposals will not be implemented and the Company will continue as a separate VCT. In these circumstances, the Board will reassess the options available to the Company.
In October 2011, the Board sent a survey to Shareholders seeking their views in relation to the future of the Company. Following the feedback provided by Shareholders, the Company changed its investment policy in March 2012 to give it the flexibility to invest in a number of sectors (rather than restrict investments to the health sector) and has undertaken a number of initiatives in an attempt to increase the size of the Company. The Company completed a merger with Longbow Growth and Income VCT plc under which it acquired LGIV's net assets in consideration for the issue of Shares. The Company also carried out an offer forsubscription from February 2012 to April 2012 (spanning the 2011/12 tax year and the 2012/13 tax year) raising gross proceeds of £31,000 and an enhanced share buyback with gross proceeds of £1.2 million being reinvested in the Company.
Notwithstanding these initiatives, as at 30 April 2013 the Company had net assets of £7.6 million. In the light of the difficulties encountered by the Board increasing the size of the Company and the challenging financial markets, the Board decided to consider alternative strategies. The Board has concluded that Shareholders' interests will be best served by a merger with another larger listed VCT. After considering available options including mergers with a number of other VCTs, the Board has reached agreement with ProVen Growth & Income VCT in respect of a merger of the Company and ProVen Growth & Income VCT pursuant to the Scheme.
Under the Proposals, the Company will be wound up voluntarily pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986. The Scheme provides for the business and assets of the Company to be transferred to ProVen Growth & Income VCT in consideration for the issue of New ProVen Growth & Income VCT Shares of an equivalent value to Shareholders.
Under the Proposals, the Company will be placed into members' voluntary liquidation and its assets will (after setting aside a Liquidation Fund to cover the estimated liabilities and contingent liabilities of the Company including any amounts required to purchase the Shares of any members who have validly dissented from the Scheme under section 111(2) of the Insolvency Act 1986) be transferred to ProVen Growth & Income VCT in consideration for the issue of New ProVen Growth & Income VCT Shares to Shareholders. The Scheme will be completed on a relative adjusted net asset value basis. The number of New ProVen Growth & Income VCT Shares to be issued to Shareholders will be calculated based on the unaudited net asset value of both VCTs as at the Calculation Date (expected to be 2 August 2013), adjusted to take into account each VCT's allocation of the estimated costs and expenses of the Proposals. Further details of the calculations of value and the number of New ProVen Growth & Income VCT Shares to be issued are set out in paragraphs 3 and 6 of Part 3 of this document.
The New ProVen Growth & Income VCT Shares will rank pari passu with the existing ProVen Growth & Income VCT Shares, save that they shall not qualify for the interim dividend payable by ProVen Growth & Income VCT in respect of the period ended 28 February 2013.
The Board and the ProVen Growth & Income VCT Board have considered what the size and future composition of ProVen Growth & Income VCT's board of directors should be following the Scheme becoming effective and have taken into account the amount of the respective net assets of both VCTs. The ProVen Growth & Income VCT Board currently comprises four directors, Marc Vlessing (Chairman), Natasha Christie-Miller, James Stewart and Malcolm Moss (who is also a member of Beringea and is not therefore independent of the Investment Manager. As part of the Proposals, it is intended that Frank Harding will join the ProVen Growth & Income VCT Board on the Effective Date. None of the other Directors will join the enlarged ProVen Growth & Income VCT Board and the total number of directors will reduce from eight directors (across both VCTs) to five directors (with a resultant annual cost saving of approximately £40,000). As part of the participation of ProVen Growth & Income VCT in the Scheme, a resolution will be proposed at the general meeting of ProVen Growth & Income VCT to be held on 30 July 2013 to increase the aggregate cap on fees and expenses of ProVen Growth & Income VCT Directors from £100,000 to £150,000, allowing an additional ProVen Growth & Income VCT Director to be appointed upon the Scheme becoming effective. It is also intended that I will be appointed as a consultant to the ProVen Growth & Income VCT Board to assist with the transition of the Company's investment portfolio to ProVen Growth & Income VCT. This consultancy appointment will last for one year from the Effective Date and any fees payable to me will be borne by the Investment Manager.
An interim dividend of one pence per Share was declared by the Board on 27 June 2013 and Shareholders who are on the Register at 6.00 p.m. on the record date of 5 July 2013 will be entitled to receive such a dividend. The Interim Dividend will be paid on 25 July 2013. The Shares will go ex dividend on 3 July 2013.
In the light of the Proposals, the Company has announced today the suspension of its dividend reinvestment scheme. If the Scheme does not become effective and the Company continues as a standalone VCT, the Board will consider lifting this suspension and reopening the dividend re-investment scheme.
ProVen Growth & Income VCT is a venture capital trust which was launched in 2001. ProVen Growth & Income VCT aims to provide investors with long-term returns greater than those available from direct investment in quoted businesses by investing in a portfolio of carefully selected smaller companies with excellent growth prospects.
ProVen Growth & Income VCT's investment portfolio consists of 25 unquoted investments and three quoted investments. As at 26 June 2013 (being the latest practicable date prior to publication of this document) the aggregate value of ProVen Growth & Income VCT's investment portfolio was £20.1 million. In addition, ProVen Growth & Income VCT had cash of approximately £25.7 million. As at 28 February 2013 (being the date of the latest published net asset value of a ProVen Growth & Income VCT Share), the net asset value per ProVen Growth & Income VCT Share was 87.7 pence.
If the Scheme becomes effective, Shareholders will continue to benefit from the management expertise of Beringea and reduced basic investment management fees (with the basic investment management fee payable by ProVen Growth & Income VCT being 2.0 per cent. per annum of its net assets compared to the basic investment management fee of 2.5 per cent. of the Company's net assets currently payable) and reduced total expenses as a percentage of net assets. In line with the Company's current management arrangements, the Investment Manager is also entitled to receive a performance incentive fee from ProVen Growth & Income VCT if certain performance conditions are satisfied. Further details of ProVen Growth & Income VCT's investment management arrangements (which will continue if the Scheme becomes effective) are set out in paragraph 8 of Part 4 of this document.
Further details of ProVen Growth & Income VCT are set out in Part 4 of this document and in the accompanying Prospectus published by ProVen Growth & Income VCT.
The Directors consider that the Proposals have the following benefits for Shareholders:
1. This is not a profit forecast. There is no certainty that any dividends will be paid by ProVen Growth & Income VCT following the Scheme becoming effective and dividend payments will depend on the amount and timing of profits realised from investments.
ProVen Growth & Income VCT has been managed by Beringea since it was launched in 2001. Beringea also manages the Company and two other VCTs: ProVen VCT plc and ProVen Planned Exit VCT plc.
The table below illustrates the net asset value total return of ProVen Growth & Income VCT plc and the total return on the Numis Smaller Companies Index (ex Investment Companies) over the ten year period to 28 February 2013:
| Net asset value total return performance | ||||||
|---|---|---|---|---|---|---|
| 1 year (%) |
2 years | 3 years (%) |
5 years (%) |
10 years (%) |
||
| (%) | ||||||
| ProVen Growth and Income VCT plc | ||||||
| (i) | Original ordinary shares (Note 4) | 12.8 | 13.2 | 32.0 | 19.5 | 216.2 |
| (ii) | Original C shares (Note 4) | 12.8 | 13.2 | 32.0 | 11.4 | n/a |
| (iii) | New ordinary shares issued prior | |||||
| to October 2012 (Note 3) | 12.8 | 13.2 | 32.0 | n/a | n/a | |
| (iv) | D shares (Note 5) | 15.5 | 11.3 | 8.6 | n/a | n/a |
| (v) | Total return of the Numis | |||||
| Smaller Companies Index | ||||||
| (ex Investment Companies) | 23.3 | 28.1 | 65.4 | 66.3 | 332.7 |
Source: ProVen Growth & Income VCT
(1) Past performance is not a guide to future performance.
The aggregate costs and expenses to be incurred by ProVen Growth & Income VCT and the Company in connection with the Scheme are expected to be approximately £240,000 (including VAT and stamp duty). It is estimated that aggregate costs and expenses of approximately £100,000 (including VAT) will be borne by the Company in connection with the Scheme as ProVen Growth & Income VCT has agreed to meet the first £140,000 of the total costs and expenses of the Scheme with £40,000 of this amount to be reimbursed to ProVen Growth & Income VCT by Beringea by means of a partial management fee waiver over one year commencing on the Effective Date (with £10,000 of the management fees otherwise payable to Beringea waived each quarter until £40,000 of the costs and expenses paid by ProVen Growth & Income VCT have been recovered in full). If the total costs and expenses incurred by ProVen Growth & Income VCT and the Company are more than £240,000 (including VAT) ProVen Growth & Income VCT and the Company will each meet 50 per cent. of any such costs in excess of this amount.
The Board has also agreed to a Liquidator's retention of up to £20,000 which will be retained by the Liquidator to meet any unforeseen costs and liabilities. If the Scheme does not become effective, the Company will bear abort costs and expenses estimated at approximately £95,000 (including VAT). In these circumstances, the Board will reassess the options available to the Company which may result in additional costs being incurred by the Company.
The Register will remain open until the Effective Date, but the Shares will be disabled in CREST on 31 July 2013. The last day for trading in the Shares on the London Stock Exchange for normal settlement (in order to enable settlement prior to the Record Date) will be 29 July 2013. As from 30 July 2013, dealings should be for cash settlement only and, in the case of certificated Shares, will only be registered if documents of title are delivered immediately. The Record Date, being the date for determining which Shareholders are entitled to participate in the Scheme, is 6.00 p.m. on 2 August 2013. Dealings in the Shares on the London Stock Exchange will be suspended at 7.30 a.m. on 6 August 2013 and it is expected that the listing of the Shares will be cancelled on or around 7 August 2013. Further details regarding dealings in the Shares on the London Stock Exchange are set out in paragraph 2 of Part 2 of this document.
As explained in more detail in Part 5 of this document, the receipt by Shareholders of ProVen Growth & Income VCT Shares will allow Shareholders to retain any upfront VCT income tax relief they obtained on subscription for their Shares (or, in the case of Shareholders who originally subscribed for shares in Longbow Growth and Income VCT, on subscription for their original shares in Longbow Growth and Income VCT plc) and should not constitute a disposal of their Shares for UK capital gains tax purposes. Shareholders should, for UK tax purposes, effectively be able to treat the New ProVen Growth & Income VCT Shares received pursuant to the Scheme as if they had been acquired at the date of and the cost of the original Shares in the Company (or shares in Longbow Growth and Income VCT plc, if applicable). As ProVen Growth & Income VCT is also a VCT, the usual VCT tax reliefs should continue to apply.
For a discussion on certain risk factors which should be taken into account when considering whether to vote in favour of the Resolutions, please see pages 3 to 6 of this document.
The notices convening the First General Meeting (to be held at 10.00 a.m. on 26 July 2013) and the Second General Meeting (to be held at 10.00 a.m. on 6 August 2013) are set out on pages 37 to 42. Both General Meetings will be held at the offices of Beringea LLP, 39 Earlham Street, London WC2H 9LT.
The resolution to be considered at the First General Meeting (which is required under the Insolvency Act 1986 and will be proposed as a special resolution) will, if passed, approve the Scheme and authorise its implementation by the Liquidator. An explanation of this resolution is set out in Part 3 of this document. The resolution will require the approval of at least 75 per cent. of the votes cast in respect of it. The Scheme will not become effective unless and until, inter alia, the resolution to be proposed at the Second General Meeting has also been passed.
The resolution to be considered at the Second General Meeting (which is required under the Insolvency Act 1986 and will be proposed as a special resolution) will be to wind up the Company voluntarily and appoint the Liquidator. This resolution is subject to the conditions set out in paragraph 11 of Part 3 of this document being fulfilled. The resolution will also authorise the Liquidator to exercise certain powers for which the express sanction of Shareholders is required. The resolution will require the approval of at least 75 per cent. of the votes cast in respect of it.
Shareholders should note that the Annual General Meeting of the Company convened for 10.00 a.m. on 9 July 2013 will still be held as there is no certainty that the Proposals will become effective.
Implementation of the Scheme is conditional, inter alia, on the Resolutions being passed. If either of the Resolutions is not passed or any of the other conditions to the Scheme are not satisfied, the Proposals will not be implemented, in which event the Company will continue as a separate VCT.
The Scheme is also conditional on the shareholders of ProVen Growth & Income VCT approving the issue of ProVen Growth & Income VCT Shares in connection with the Scheme and on the other conditions set out in paragraph 11 of Part 3 of this document being satisfied.
Shareholders will find enclosed forms of proxy for use in relation to the General Meetings (BLUE for the First General Meeting and GREEN for the Second General Meeting).
Whether or not they propose to attend the General Meetings, Shareholders are asked to complete and return both forms of proxy in accordance with the instructions printed thereon as soon as possible and, in any event, so as to be received by Beringea LLP, 39 Earlham Street, London WC2H 9LT by not later than 10.00 a.m. on 24 July 2013, in the case of the form of proxy for the First General Meeting, and 10.00 a.m. on 2 August 2013, in the case of the form of proxy for the Second General Meeting. Completion and return of a form of proxy will not prevent you from attending and voting in person at the relevant General Meeting should you wish to do so.
The issue of New ProVen Growth & Income VCT Shares to persons, residents in or citizens of jurisdictions outside the United Kingdom may be affected by the laws of the relevant jurisdiction.
Further details relating to Overseas Shareholders are set out in paragraph 5 of Part 2.
The Board considers the proposals described in this document and the Resolutions to implement them to be in the best interests of Shareholders as a whole. Accordingly, the Board recommends unanimously that Shareholders vote in favour of the Resolutions, as the Directors intend to do in respect of their own beneficial holdings which total 103,537 Shares (representing 0.5 per cent. of the total voting rights in the Company exercisable at each General Meeting).
Shareholders who are in any doubt as to the contents of this document or as to the action they should take should consult their stockbroker, bank manager, solicitor, accountant or an appropriately qualified and duly authorised independent financial adviser without delay.
Yours faithfully
Charles Pinney Chairman
Subject to the passing of the Resolutions (and satisfaction of the other conditions of the Scheme, full details of which are set out in paragraph 11 of Part 3), the Company will be placed into members' voluntary liquidation and the Scheme will take effect with effect from Admission.
Before any assets are transferred to ProVen Growth & Income VCT, the Liquidator will set aside a Liquidation Fund to cover all liabilities of the Company (including tax and contingent and unknown liabilities) and any amounts required to purchase the Shares of any members who have validly dissented from the Scheme under section 111(2) of the Insolvency Act 1986. After provision has been made for the Liquidation Fund, the remainder of the Company's assets will be transferred to ProVen Growth & Income VCT in accordance with the Transfer Agreement. In consideration for the transfer of such assets to ProVen Growth & Income VCT, New ProVen Growth & Income VCT Shares will be issued to Shareholders (save for any dissenting Shareholders).
Any surplus in the Liquidation Fund will be paid in cash to Shareholders on the Register on the Effective Date (as amended for any transfer of Shares after the Effective Date which the Liquidator has sanctioned under section 88 of the Insolvency Act 1986) in accordance with their entitlements under the Scheme as one or more distribution, save that no payment of less than £5.00 shall be made to any Shareholder. Any such residual amounts shall be donated to charity.
The last day for trading in the Shares on the London Stock Exchange for normal settlement (in order to enable settlement prior to the Record Date) will be 29 July 2013. As from 30 July 2013, dealings will be for cash settlement only and, in the case of certificated Shares, will only be registered if documents of title are delivered immediately.
The Record Date, being the date for determining which Shareholders are entitled to participate in the Scheme, is the close of business on 2 August 2013.
If Shareholders dispose of their Shares otherwise than through the London Stock Exchange, they must make their own arrangements with the other parties concerned as regards entitlements under the Scheme.
Applications will be made to the UK Listing Authority and the London Stock Exchange respectively for the New ProVen Growth & Income VCT Shares to be issued under the Scheme to be admitted to the premium segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. If the Scheme becomes effective, it is expected that the New ProVen Growth & Income VCT Shares will be admitted to the Official List on 7 August 2013, and that the first day of dealings in such securities will be 7 August 2013.
New ProVen Growth & Income VCT Shares will be issued in registered form and may be held in either certificated or uncertificated form. Those Shareholders who hold their Shares in certificated form at the Record Date will receive their New ProVen Growth & Income VCT Shares in certificated form. It is expected that share certificates in respect of such New ProVen Growth & Income VCT Shares will be despatched to the Shareholders entitled thereto in the week commencing 19 August 2013.
It is expected that Shareholders who hold their Shares in uncertificated form at the Record Date will receive their New ProVen Growth & Income VCT Shares in uncertificated form on 7 August 2013, although ProVen Growth & Income VCT reserves the right to issue such securities in certificated form. In normal circumstances, this is only likely to be exercised in the event of an interruption, failure or breakdown of CREST or of the facilities or system operated by ProVen Growth & Income VCT's registrar in connection with CREST. ProVen Growth & Income VCT will procure that instructions are given to credit the appropriate stock accounts in CREST with the relevant entitlements to New ProVen Growth & Income VCT Shares in uncertificated form.
Existing certificates in respect of Shares will cease to be of value for any purpose following the despatch to Shareholders of certificates in respect of their new holdings in ProVen Growth & Income VCT.
All documents and remittances despatched to or from Shareholders or their appointed agents in connection with the Scheme will be despatched at Shareholders' own risk.
Section 111 of the Insolvency Act 1986 provides that Shareholders have the right to dissent from the Scheme.
In respect of any Shareholders who formally dissent from the Scheme by validly exercising their rights under section 111(2) of the Insolvency Act 1986, the Liquidator will retain an amount of the cash, undertaking and securities of the Company in the Liquidation Fund which at his discretion he believes is sufficient to purchase the interests of such Shareholders.
The definitions set out on pages 33 to 36 of this document have the same meaning when used in the context of the Scheme. Save as otherwise provided in this Part 3, any Shares held by persons who validly exercise their rights under section 111(2) of the Insolvency Act 1986 shall be disregarded for the purposes of this Part 3 and shall be treated as if those Shares were not in issue.
(b) second, there shall be appropriated to the Rollover Fund all the cash, undertaking and other assets of the business of the Company remaining after the appropriation referred to in paragraph 2.2(a) above.
(j) liabilities shall be valued in accordance with the Company's normal accounting policies. Such liabilities shall include unpaid Scheme costs and expenses including costs and expenses incurred or to be incurred by the Company in formulating, preparing and implementing the Proposals.
In this paragraph 3.1, the Relevant Time means the time and date at which any calculation of value is required by the Scheme to be made (and, for the purposes of apportioning assets to the Liquidation Fund and the Rollover Fund, shall be the Calculation Date). The Directors shall consult with the Liquidator in making determinations pursuant to this paragraph 3.1.
On the Effective Date, or as soon as practicable thereafter, the Investment Manager, on the instructions of the Liquidator, shall procure that there shall be delivered to ProVen Growth & Income VCT (or its nominee) particulars of the assets comprised in the Rollover Fund and a list certified by the Registrar of the names and addresses of, and the numbers of Shares held by each Shareholder on the Register on the Record Date and the entitlements of such Shareholders to New ProVen Growth & Income VCT Shares under the Scheme.
5.1 On the Effective Date, or as soon as practicable thereafter, the Liquidator (in his personal capacity and on behalf of the Company) shall enter into and implement the Transfer Agreement (subject to such modifications as may be agreed between the parties thereto), whereby the Liquidator shall procure the transfer of the Rollover Fund to ProVen Growth & Income VCT (or its nominee) in exchange for the issue of New ProVen Growth & Income VCT Shares to holders of Shares on the basis set out in paragraph 6.1 of this Part 3.
5.2 The Transfer Agreement provides that the assets to be transferred to ProVen Growth & Income VCT shall be transferred with such rights and title as the Company may have in respect of the same or any part thereof subject to and with the benefit of all and any rights, restrictions, obligations, conditions and agreements affecting the same or any part thereof, including the right to all income, dividends, distributions, interest and other rights and benefits attaching thereto or accruing therefrom except for any such income, dividend, distribution, interest or other right or benefit on any investments marked "ex" the relevant income, dividend, distribution, interest or other right or benefit at or prior to the Effective Date. The Transfer Agreement further provides that the Liquidator, insofar as he is reasonably able to do so by law or otherwise, shall comply with all reasonable requests made by ProVen Growth & Income VCT (or its nominee) in respect of the assets to be acquired and shall, in particular, account to ProVen Growth & Income VCT for all income, dividends, distributions, interest and other rights and benefits in respect of such assets received after the Effective Date, except for any such income, dividend, distribution, interest or other right or benefit on any investment marked "ex" the relevant income, dividend, distribution, interest or other right or benefit at or prior to the Effective Date.
6.1 In consideration for the transfer of the Rollover Fund to ProVen Growth & Income VCT in accordance with paragraph 5 above, New ProVen Growth & Income VCT Shares shall be issued to the holders of Shares (other than any such holders who shall have validly exercised their rights in accordance with section 111(2) of the Insolvency Act 1986) on the basis that the number of New ProVen Growth & Income VCT Shares to be issued to each holder of Shares shall be determined by the following formula and otherwise on the terms and in the manner prescribed in the Transfer Agreement:
$$
A = \frac{B \times C}{D}
$$
where:
A = the aggregate number of New ProVen Growth & Income VCT Shares to be issued to each Shareholder holding Shares;
B = the FAV per PHV Share;
provided that no fraction of a ProVen Growth & Income VCT Share shall be issued to such Shareholder, and assets in the Rollover Fund representing fractional entitlements will be retained for the benefit of ProVen Growth & Income VCT.
to the address of the first-named) or to such other person and address as may be specified by such persons in writing, in each case at the risk of the persons entitled thereto; and
The provisions of the Scheme shall have effect subject to such non-material modifications or additions as the Directors and the parties to the Transfer Agreement may from time to time approve in writing.
The Company, the Directors, the Liquidator, the Investment Manager and ProVen Growth & Income 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 the Company, the Directors (or any of them), the Investment Manager, ProVen Growth & Income VCT, the ProVen Growth & Income VCT Directors or the Registrar, auditors, bankers or other professional advisers, and no such person shall be liable or responsible for any loss suffered as a result thereof by the Company, any Shareholder, ProVen Growth & Income VCT or any shareholder of ProVen Growth & Income VCT.
Nothing in the Scheme or in any document executed under or in connection with the Scheme shall impose any personal liability on the Liquidator save for any liability arising out of any negligence, fraud, breach of duty or wilful default by the Liquidator in the performance of his duties and this shall, for the avoidance of doubt, exclude any such liability for any action taken by the Liquidator in accordance with the Scheme or the Transfer Agreement.
ProVen Growth & Income VCT (previously known as ProVen Media VCT plc and Wisemanor plc) was launched in 2001 with the investment objective of providing investors with long-term returns greater than those available from direct investment in quoted businesses by investing in a portfolio of carefully selected smaller companies with excellent growth prospects. ProVen Growth & Income VCT is also a VCT managed by Beringea.
The directors of ProVen Growth & Income VCT are Marc Vlessing (Chairman), Natasha Christie-Miller, Malcolm Moss and James Stewart. Malcolm Moss is a member of Beringea (and is therefore not independent of the Investment Manager). As part of the Proposals it is intended that Frank Harding will join the ProVen Growth & Income VCT Board on the Effective Date. It is also intended that Charles Pinney will be appointed as a consultant to the ProVen Growth & Income VCT Board to assist with the transition of the Company's investment portfolio to ProVen Growth & Income VCT. This consultancy appointment will last for one year from the Effective Date and any fees payable to the consultant will be borne by the Investment Manager.
ProVen Growth & Income VCT's investment portfolio consists of 25 unquoted investments and three quoted investments. As at 26 June 2013 (being the latest practicable date prior to the publication of this document) the aggregate value of ProVen Growth & Income VCT's investment portfolio was £20.1 million. In addition, ProVen Growth & Income VCT had cash of approximately £25.7 million. As at 28 February 2013 (being the date of the latest published net asset value of a ProVen Growth & Income VCT Share), the net asset value per ProVen Growth & Income VCT Share was 87.7 pence.
Source: ProVen Growth & Income VCT.
ProVen Growth & Income VCT's current investment policy is to achieve long-term returns greater than those available from investing in a portfolio of quoted companies, by investing in a portfolio of carefully selected qualifying investment in small and medium sized unquoted companies with excellent growth prospects and a portfolio of non-qualifying investments including cash, liquidity funds, fixed interest securities and non-qualifying venture capital investments. The full text of ProVen Growth & Income VCT's current investment policy is set out in the accompanying Prospectus.
The ProVen Growth & Income VCT Board believes that the performance of ProVen Growth & Income VCT could be improved if its investment policy gave it more flexibility to invest in debt and debt-related securities in growth companies within its portfolio of non-qualifying investments, either directly or indirectly. ProVen Growth & Income VCT already provides debt funding alongside equity funding within many of its qualifying investments and is proposing to amend its investment policy to allow investment in debt and debt-related securities from the non-qualifying venture capital investment portfolio.
Accordingly, at the ProVen Growth & Income VCT General Meeting a resolution will be proposed to amend the investment policy. The Scheme is not conditional upon ProVen Growth & Income VCT Shareholders approving the proposed change to the investment policy. The full text of the proposed investment policy is also set out in the Prospectus.
The ProVen Growth & Income VCT Directors have set an objective of paying dividends each year which will equate to a yield of approximately 5 per cent. of net asset value. The ability to achieve this objective will, however, depend on there being sufficient reserves available for distribution, which in turn will depend on the amount and timing of profits realised from the sale of investments, which cannot be guaranteed. There is no certainty that any dividends will be paid. The ProVen Growth & Income VCT Board may decide to pay a special dividend if there is a realisation from its portfolio which results in an exceptionally large gain which may result in dividends being paid of in excess of the target yield of 5 per cent. The average annual dividend yield from the ordinary shares of the Company over the past five financial years (to 28 February 2013) has been 4.1 per cent. of NAV, although this is not a guide to the future level of dividend payments.
ProVen Growth & Income VCT has declared an interim dividend of four pence per ProVen Growth & Income VCT Share in respect of the period ended 28 February 2013 which will be paid on 2 August 2013 to shareholders on its register of members on 5 July 2013. The New ProVen Growth & Income VCT Shares will not therefore qualify to receive this dividend.
ProVen Growth & Income VCT's share capital comprises ordinary shares of 1.6187 pence each. The New ProVen Growth & Income VCT Shares will rank pari passu with the existing ProVen Growth & Income VCT Shares, save that they shall not qualify for the dividend payable by ProVen Growth & Income VCT in respect of the period ended 28 February 2013.
Under the guidelines currently established by the ProVen Growth & Income VCT Board, the ProVen Growth & Income VCT Directors aim to provide ProVen Growth & Income VCT Shareholders who wish to sell their ProVen Growth & Income VCT Shares with an opportunity to do so by operating an active policy of purchasing ProVen Growth & Income VCT Shares in the market. Subject to ensuring sufficient liquidity to meet working capital requirements and any need to retain funds to remain at an economically viable size, it is the intention that ProVen Growth & Income VCT will buy back ProVen Growth & Income VCT Shares where it has sufficient cash and reserves available to do so at a discount of approximately 10 per cent. to the most recently announced NAV per ProVen Growth & Income VCT Share (as adjusted for any dividends paid since the announcement).
Beringea is entitled to receive an annual investment management fee of 2.0 per cent. of the ProVen Growth & Income VCT's net assets, calculated and paid on a quarterly basis. However, the annual running costs of ProVen Growth & Income VCT (excluding trail commission, performance incentive fees and certain other amounts) are capped at 3.6 per cent. of its net assets; any excess will either be paid by the Investment Manager or refunded to ProVen Growth & Income VCT by way of a reduction to the Investment Manager's fees.
In line with normal VCT practice, the Investment Manager is also entitled to receive a performance related incentive fee. The incentive fee is based on the performance of separate tranches of shares issued by ProVen Growth & Income VCT being the Original Ordinary Shares; ProVen Growth & Income VCT Shares issued prior to the 2010/11 Offer; and ProVen Growth & Income VCT Shares issued pursuant to the 2010/2011 Offer and the 2011/12 Offer; ProVen Growth & Income VCT Shares which arose upon the conversion of the ProVen Growth & Income VCT D Shares into ProVen Growth & Income VCT Shares on 29 October 2012; and ProVen Growth & Income VCT Shares issued pursuant to the 2012/13 Offer and the 2013/14 Offer. Each such tranche of shares has its own performance hurdles and targets before a performance fee is payable. Details of the performance fee arrangements are set out below:
In relation to dividends paid as the result of the realisation of investments made from the Original Ordinary Share fund, Beringea is entitled to receive an incentive fee equal to 15 per cent. of the cumulative dividends paid from 1 March 2006 up to 4p per Original Ordinary Share per annum, plus 20 per cent. of the cumulative dividends paid from 1 March 2006 in excess of 4p per Original Ordinary Share per annum, less the amount of any incentive fee previously paid to Beringea in relation to the Original Ordinary Shares. For the purposes of calculating this element of the performance incentive fee for dividends paid following the exchange of Original Ordinary Shares for ProVen Growth & Income VCT Shares, a pro-forma dividend per Original Ordinary Share will be calculated, based on the number of Original Ordinary Shares in issue immediately prior to the share exchange.
In relation to the other ProVen Growth & Income VCT Shares issued prior to the 2010/2011 Offer, providing that the Performance Value per ProVen Growth & Income VCT Share is at least 130p, Beringea is entitled to receive a performance incentive fee equal to 15 per cent. of the cumulative dividends paid on the ProVen Growth & Income VCT Shares after 1 March 2009 up to 4p per ProVen Growth & Income VCT Share per annum, plus 20 per cent. of the cumulative dividends paid after 1 March 2009 in excess of 4p per ProVen Growth & Income VCT Share per annum, less the amount of any incentive fee previously paid to Beringea in relation to the ProVen Growth & Income VCT Shares. Dividends paid on the C Shares prior to the exchange of C Shares for ProVen Growth & Income VCT Shares shall be treated as dividends on the ProVen Growth & Income VCT Shares.
In relation to the ProVen Growth & Income VCT Shares issued under the 2010/2011 Offer and 2011/2012 Offers (the "Further Ordinary Shares"), providing that ProVen Growth & Income VCT has paid cumulative dividends equal to at least 4 per cent. of the weighted average Offer Price per Further Ordinary Share per annum for the financial years commencing on or after 1 March 2014 and the Performance Value per Further Ordinary Share is at least 1.3 times the weighted average Offer Price per Further Ordinary Share, Beringea is entitled to receive a performance incentive fee equal to 15 per cent. of the cumulative dividends paid on the Further Ordinary Shares after 1 March 2014 up to 4 per cent. of the weighted average Offer Price per Further Ordinary Share per annum, plus 20 per cent. of the cumulative dividends paid after 1 March 2014 in excess of 4 per cent. of the weighted average Offer Price per Further Ordinary Share per annum, less the amount of any incentive fee previously paid to Beringea in relation to the Further Ordinary Shares.
Beringea is entitled to receive performance incentive fees in respect of ProVen Growth & Income VCT Shares which arose upon the conversion of the ProVen Growth & Income's D Shares into Ordinary Shares on 29 October 2012 (the "Converted Ordinary Shares"). These are first calculated in relation to the financial years starting on or after 1 March 2012 and provided that:
ProVen Growth & Income VCT Shares issued pursuant to the 2012/13 Offer and 2013/14 Offer
In relation to the ProVen Growth & Income VCT Shares issued under the 2012/2013 Offer and the 2013/2014 Offer (the "2012/2013 Ordinary Shares"), providing that ProVen Growth & Income VCT has paid cumulative dividends equal to at least 4 per cent. of the weighted average Offer Price per 2012/2013 Ordinary Share per annum for the financial years starting 1 March 2016 and the Performance Value per 2012/2013 Ordinary Share is at least 1.3 times the weighted average Offer Price per 2012/2013 Ordinary Share, Beringea is entitled to receive a performance incentive fee equal to 15 per cent. of the cumulative dividends paid on the 2012/2013 Ordinary Shares after 1 March 2016 up to 4 per cent. of the weighted average Offer Price per 2012/2013 Ordinary Share per annum, plus 20 per cent. of the cumulative dividends paid after 1 March 2016 in excess of 4 per cent. of the weighted average Offer Price per 2012/2013 Ordinary Share per annum, less the amount of any incentive fee previously paid to Beringea in relation to the 2012/2013 Ordinary Shares.
There was no performance fee payable to Beringea by the Company in respect of the financial year ended 28 February 2013.
ProVen Growth & Income VCT's annual running costs (excluding trail commission, performance incentive fees and certain other amounts) are capped at 3.6 per cent. of its net assets at the year end. Any excess will be paid by Beringea by reducing its fees payable (with any such reduction being in addition to the contribution to the costs of the Proposals of £40,000 to be reimbursed by Beringea to ProVen Growth & Income VCT by means of a partial management fee waiver with £10,000 of the management fees otherwise payable waived each quarter until the costs contribution has been paid in full).
The accounting reference date of ProVen Growth & Income VCT is 28 February and annual accounts are dispatched in July each year with half yearly accounts for the six months period to 31 August usually being dispatched in October each year. The auditors of ProVen Growth & Income VCT are BDO LLP.
The NAV of a ProVen Growth & Income VCT Share will be calculated at least on a quarterly basis and published via a Regulatory Information Service. The most recent unaudited NAV and share price of a ProVen Growth & Income VCT Share are available free on the website of the London Stock Exchange.
The following paragraphs apply to the Company and to such persons holding Shares as an investment in the Company who are the absolute beneficial owners ofsuch 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 and is subject to changes therein, is given by way of general summary and does not constitute legal or tax advice.
If you are in any doubt about your position, or if you may be subject to tax in a jurisdiction other than the UK, you should consult your independent financial adviser.
The receipt by Shareholders of ProVen Growth & Income VCT Shares under the Scheme will allow Shareholders to retain any upfront VCT income tax relief they obtained on subscription for their Shares (provided they retain their New ProVen Growth & Income VCT Shares until at least five years after their original Shares in the Company were issued). Former shareholders of Longbow Growth and Income VCT plc who received Shares under the terms of the merger with the Company in March 2012 will also retain any upfront VCT income tax relief they obtained on subscription for their shares in Longbow Growth and Income VCT plc (provided that they retain their New ProVen Growth & Income VCT Shares until at least five years after their original shares in Longbow Growth and Income VCT plc were issued).
The effective exchange of existing Shares in the Company for ProVen Growth & Income VCT Shares should not constitute a disposal of the existing Shares for the purposes of UK taxation. Instead, the new holdings of ProVen Growth & Income VCT Shares should be treated as having been acquired at the same time and at the same cost as the existing Shares in the Company from which they are derived.
For Shareholders holding (together with their associates) more than 5 per cent. of the Shares in the Company, clearance has been obtained from HMRC in terms of section 138 of TCGA that the treatment described above for persons who (together with their associates) own less than 5 per cent. of the Shares in the Company should also apply to them.
Shareholders in ProVen Growth & Income VCT, as a VCT, should be afforded the usual reliefs available to shareholders in VCTs. Shareholders should receive dividends paid tax-free and should not be subject to UK taxation on any capital gains on the disposal of ProVen Growth & Income VCT Shares.
No UK stamp duty will be payable by Shareholders as a result of the implementation of the Scheme.
Dissenting Shareholders whose holdings are purchased for cash shall be treated as having disposed of their existing Shares in the Company. The Company should still be able to claim benefit of VCT status and the dissenting Shareholder should not be subject to any UK taxation in respect of any capital gains arising on disposal. However, the purchase will constitute a disposal of the existing holding in the Company. As dissenting Shareholders who subscribed for their Shares in the past five years would, in these circumstances, dispose of Shares within the holding period required to retain upfront tax relief, income tax relief on those subscriptions will also be repayable.
Clearance has been obtained from HMRC in respect of the Scheme under section 701 of the Income Tax Act 2007 and section 138 of TCGA. With regard to the former, the receipt of ProVen Growth & Income 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 been received from HMRC that the receipt by Shareholders of ProVen Growth & Income VCT Shares under the Scheme should not prejudice tax reliefs obtained by Shareholders on existing Shares in the Company and should not be regarded as a disposal.
1.1 As at the date of this document, the issued share capital of the Company is as follows:
| Number of | Total | |
|---|---|---|
| issued and | nominal | |
| fully paid | value | |
| Ordinary Shares | (£) | |
| Ordinary Shares of 1p each | 20,607,864 | £206,078.64 |
1.2 No share or loan capital of the Company is under option or has been agreed, conditionally or unconditionally, to be put under option.
2.1 The names and business addresses of the Directors, all of whom are non-executive, are as follows:
Charles Pinney Peter Arthur Frank Harding Diane James
all of 39 Earlham Street, London WC2H 9LT.
| No. of | % of voting rights |
|
|---|---|---|
| Shares | ||
| Director | ||
| Charles Pinney | 9,103 | 0.04% |
| Peter Arthur | 71,257 | 0.35% |
| Frank Harding | 23,177 | 0.11% |
| Diane James | Nil | Nil |
Save as disclosed in this paragraph 3, the Company has not entered into (other than in the ordinary course of business) (a) any contract which is or may be material to the Company within two years immediately preceding the publication of this document or (b) any contract containing provisions under which the Company has any obligation or entitlement which is material to the Company at the date of this document.
investment management agreement to preserve the status of the Company as a venture capital trust. The Investment Manager is entitled to receive management fees of 2.5 per cent. per annum of the net assets of the Company calculated on a quarterly basis.
Under the terms of the Investment Management Agreement, a performance incentive may be payable to the Investment Manager if the following conditions are met: (i) the net asset value per Ordinary Share on 31 January in any year plus the aggregate amount of dividends per Ordinary Share paid up to that date is equal to or greater than 174 pence; and (ii) not less than 50 pence of the amount referred to in (i) has been paid in the form of dividends.
The performance fees payable by the Company will be, for each financial year after the conditions are satisfied (including the financial year in which it is first satisfied), an aggregate amount equal to 20 per cent. of the Excess Return. Unless decided otherwise by the Directors, the amount of performance fee paid in any financial year shall not exceed an amount equal to 5 per cent. of the net asset value of the Company as shown in the accounts by reference to which the amount of the performance fee has been calculated. Any amount which cannot be paid as a result shall be carried forward and paid, with interest, at such time or times as such payment can be made without contravening the 5 per cent. limit. In the event that a Target Return is not achieved in respect of any financial year, the shortfall of such return will be carried forward into subsequent periods and the performance fee will only be paid once all previous and current Target Returns have been met.
The Company's annual running costs (which exclude trail commission, performance incentive fees and certain other amounts) are capped at 3.6 per cent. of the net assets at the year end. Any excess will be paid by the Investment Manager by reducing their fees payable. In the financial period ending 31 January 2013 the Investment Manager's fee was capped, with the total fee due being reduced by £89,000. As Beringea had taken a lower fee during the year (to account for the cap), at the year end £40,000 was due from Beringea in respect of the overpaid management fees.
3.7 The Company, LGIV, the Investment Manager and Longbow Capital LLP entered into a transfer agreement on 16 March 2012, pursuant to which the net assets of LGIV were transferred to the Company in exchange for the issue of new Ordinary Shares to the shareholders in LGIV.
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 Dickson Minto W.S., Broadgate Tower, 20 Primrose Street, London EC2A 2EW and will also be available at the venue of the General Meetings for at least 15 minutes before and during the General Meetings:
The following definitions apply throughout this document unless the context requires otherwise:
| 2010/2011 Offer | ProVen Growth & Income VCT's offer for subscription in respect of the 2010/2011 tax year |
|---|---|
| 2011/2012 Offer | ProVen Growth & Income VCT's offer for subscription in respect of the 2011/2012 tax year |
| 2012/2013 Offer | ProVen Growth & Income VCT's offer for subscription in respect of the 2012/2013 tax year |
| 2013/2014 Offer | ProVen Growth & Income VCT's offer for subscription in respect of the 2013/2014 tax year |
| 2012/2013 Ordinary Shares | ProVen Growth & Income VCT Shares issued under the 2012/2013 Offer |
| Actual Return | the net asset value per Ordinary Share on 31 January each year plus the aggregate amount of dividends per Ordinary Share paid up to that date after adding back any performance fees already paid by the Company |
| Admission | the admission of the New ProVen Growth & Income VCT Shares to be issued under the Proposals to the Official List with a Premium Listing and to trading on the Main Market |
| Annual General Meeting | the annual general meeting of the Company convened for 10.00 a.m. on 9 July 2013 |
| Articles | the articles of association of the Company in force from time to time |
| Board or Directors | the directors of the Company or any duly constituted committee thereof |
| Business Day | any day on which banks are open for business in London (excluding Saturdays and Sundays) |
| Calculation Date | the time and date, to be determined by the Directors but expected to be close of business on 2 August 2013 (unless the First General Meeting is adjourned), at which the FAV per PHV Share and the FAV per PGIV Share will be calculated for the purposes of the Scheme |
| certificated or in certificated form | a share which is not in uncertificated form |
| Company | ProVen Health VCT plc, a company incorporated in England and Wales with registered number 04131354 |
| Costs Contribution and Process Agreement |
the costs contribution and process agreement entered into between the Company, ProVen Growth & Income VCT and Beringea on 27 June 2013 (further details of which are set out in paragraph 3.2 of Part 6 of this document) |
| CREST | the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations) |
| CREST Manual | the CREST Reference Manual issued by Euroclear dated 27 June 2011 |
|---|---|
| CREST Regulations | the Uncertificated Securities Regulations 2001 (SI 2001/3755) (as amended) |
| C Shares | the C shares in ProVen Growth & Income VCT which existed prior to conversion into ProVen Growth & Income VCT Shares on 26 October 2009 |
| Disclosure and Transparency Rules | the Disclosure Rules and Transparency Rules of the Financial Conduct Authority |
| D Shares | the D shares of 1 pence each in ProVen Growth & Income VCT which were converted into ProVen Growth & Income VCT Shares on 29 October 2012 |
| Effective Date | the date of the passing of the resolution to be proposed at the Second General Meeting or, if later, on all conditions of such resolution being satisfied (which is expected to be 6 August 2013) |
| Euroclear | Euroclear UK & Ireland Limited |
| Excess Return | the amount by which the Actual Return exceeds the Target Return |
| FAV per PGIV Share | the formula asset value of a ProVen Growth & Income VCT Share calculated as at the Calculation Date in accordance with the Scheme |
| FAV per PHV Share | the formula asset value of an Ordinary Share calculated as at the Calculation Date in accordance with the Scheme |
| First General Meeting | the general meeting of the Company convened for 10.00 a.m. on 26 July 2013, or any adjournment thereof |
| FSMA | the Financial Services and Markets Act 2000 (as amended) |
| General Meetings | the First General Meeting and Second General Meeting |
| HMRC | HM Revenue & Customs |
| Investment Management Agreement | the agreement dated 12 February 2001 between the Company and the Investment Manager pursuant to which the Investment Manager manages the Company's investments (as amended) |
| Investment Manager or Beringea | Beringea LLP, a limited liability partnership registered in England and Wales with registered number OC342919 |
| Interim Dividend | the interim dividend payable by the Company in respect of the period ended 31 January 2013 to be paid on 25 July 2013 |
| LGIV | Longbow Growth and Income VCT plc, a company incorporated in England & Wales with registered number 7423739 (in a members' voluntary liquidation) |
| Liquidation Fund | the liquidation fund to be retained by the Liquidator as described in paragraph 2.2 of Part 3 of this document |
| Liquidator | the liquidator for the time being of the Company, being initially the person appointed at the Second General Meeting |
| London Stock Exchange | London Stock Exchange plc |
| Main Market | the London Stock Exchange's main market for listed securities |
|---|---|
| NAV or Net Asset Value | net asset value |
| New ProVen Growth & Income VCT Shares |
the ProVen Growth & Income VCT Shares to be issued pursuant to the Scheme |
| Offer Price | the offer price under the 2010/2011 Offer, the 2011/2012 Offer, the 2012/2013 Offer or the 2013/2014 Offer by ProVen Growth & Income VCT (as the case may be) |
| Official List | the Official List of the UK Listing Authority |
| Original Ordinary Shares | the ordinary shares of 1 pence each in ProVen Growth & Income VCT prior to the consolidation of the ordinary shares which took place on 26 October 2009 |
| Overseas Shareholders | Shareholders who have a registered address outside or who are resident in, or citizens, residents or nationals of, jurisdictions outside the United Kingdom |
| Performance Value | for the relevant financial year end, the sum of (i) the net asset value per share as at that date and (ii) all distributions per share declared and/or paid since the first admission of the shares to the Official List of the UK Listing Authority |
| Premium Listing | a listing on the premium segment of the Official List |
| Proposals | the proposals for the voluntary winding up and reconstruction of the Company (including the Scheme) described in this document |
| Prospectus | the prospectus published by ProVen Growth & Income VCT on 27 June 2013 |
| ProVen Growth & Income VCT | ProVen Growth and Income VCT plc, a company incorporated in England and Wales with registered number 04125326 |
| ProVen Growth & Income VCT Board or ProVen Growth & Income VCT Directors |
the directors of ProVen Growth & Income VCT or any duly constituted committee thereof |
| ProVen Growth & Income VCT General Meeting |
the general meeting of ProVen Growth & Income VCT convened for 3.00 p.m. on 30 July 2013, or any adjournment thereof |
| ProVen Growth & Income VCT Shareholder |
a holder of ProVen Growth & Income VCT Shares |
| ProVen Growth & Income VCT Shares | ordinary shares of 1.6187p each in ProVen Growth & Income VCT |
| Record Date | 6.00 p.m. on 2 August 2013, being the record date for determining which Shareholders are entitled to participate in the Scheme |
| Register | the register of members of the Company |
| Registrar | Computershare Investors Services PLC, a company incorporated in England & Wales with registered number 3498808 |
| Regulatory Information Service | any of the services authorised from time to time by the Financial Conduct Authority for the purposes of disseminating regulatory announcements |
| Relevant Time | the relevant time for the calculations of value as defined in paragraph 3.1 of Part 3 of this document |
|---|---|
| Resolutions | the resolutions set out in the notices of the General Meetings |
| Rollover Fund | the assets to be transferred to ProVen Growth & Income VCT under the Scheme for the New ProVen Growth & Income VCT Shares to be issued to Shareholders |
| Scheme | the scheme under section 110 of the Insolvency Act 1986 set out in Part 3 of this document |
| Second General Meeting | the general meeting of the Company convened for 10.00 a.m. on 6 August 2013, or any adjournment thereof |
| Shareholders | holders of Shares |
| Shares or Ordinary Shares | ordinary shares of 1p each in the capital of the Company |
| Target Return | initial net asset value per Ordinary Share rate of 94 pence as increased in line with the base rate of National Westminster Bank plc averaged over a financial year plus 2 per cent. per annum on a compound basis for each financial period commencing with the financial period ended 31 January 2002 |
| TCGA | the Taxation of Chargeable Gains Act 1992 |
| Transfer Agreement | the agreement to be entered into on or about the Effective Date between the Liquidator (in his personal capacity and on behalf of the Company), ProVen Growth & Income VCT and others, the terms of which are summarised in paragraph 3.1 of Part 6 of this document |
| UK or United Kingdom | the United Kingdom of Great Britain and Northern Ireland |
| UK Listing Authority | the Financial Conduct Authority acting in its capacity as the UK Listing Authority pursuant to Part VI of FSMA |
| uncertificated or in uncertificated form |
recorded in the register of members of the Company or ProVen Growth & Income VCT (as appropriate) as being held in uncertificated form in CREST and title to which may be transferred by means of CREST |
| VAT | value added tax |
| VCT or Venture Capital Trust | a venture capital trust as defined in section 259 of the Income Tax Act 2007 (as amended) |
(Incorporated in England and Wales with registered no. 04131354)
NOTICE IS HEREBY GIVEN that a general meeting of the Company will be held at the offices of Beringea LLP, 39 Earlham Street, London WC2H 9LT on 26 July 2013 at 10.00 a.m. for the purpose of considering and, if thought fit, passing the following resolution, which will be proposed as a special resolution, namely:
THAT:
WC2H 9LT
Registered office: By Order of the Board 39 Earlham Street Beringea LLP London Company Secretary
(xii) At 26 June 2013 (the business day before the printing of this Notice), the Company's issued capital consisted of 20,607,864 Ordinary Shares carrying one vote each. Therefore, the total voting rights in the Company at 26 June 2013 comprised 20,607,864 votes. Further information regarding the General Meeting which the Company is required by section 311A of the Companies Act 2006 to publish on a website in advance of the General Meeting (including this Notice) can be accessed at www.provenvcts.co.uk.
(xiii) In accordance with section 311A of the Companies Act 2006, the contents of this Notice of Meeting, details of the total number of shares in respect of which members are entitled to exercise voting rights at the Meeting and, if applicable, any members' statements, members' resolutions or members' matters of business received by the Company after the date of this notice will be available on the Company's website www.provenvcts.co.uk.
(Incorporated in England and Wales with registered no. 04131354)
NOTICE IS HEREBY GIVEN that a general meeting of the Company will be held at 10.00 a.m. on 6 August 2013 at the offices of Beringea LLP, 39 Earlham Street, London WC2H 9LT to consider and, if thought fit, pass the following resolution, which will be proposed as a special resolution, namely:
THAT:
WC2H 9LT
Registered office: By Order of the Board 39 Earlham Street Beringea LLP London Company Secretary
(xii) At 26 June 2013 (the business day before the printing of this Notice), the Company's issued capital consisted of 20,607,864 Ordinary Shares carrying one vote each. Therefore, the total voting rights in the Company at 26 June 2013 comprised 20,607,864 votes. Further information regarding the General Meeting which the Company is required by section 311A of the Companies Act 2006 to publish on a website in advance of the General Meeting (including this Notice) can be accessed at www.provenvcts.co.uk.
(xiii) In accordance with section 311A of the Companies Act 2006, the contents of this Notice of Meeting, details of the total number of shares in respect of which members are entitled to exercise voting rights at the General Meeting and, if applicable, any members' statements, members' resolutions or members' matters of business received by the Company after the date of this notice will be available on the Company's website www.provenvcts.co.uk.
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