OSA Oct Sec.Aim

 
TIDMOSA 
 
JOINT ANNOUNCEMENT 
 
OCTOPUS IHT AIM VCT PLC ("IHT AIM VCT") 
OCTOPUS SECOND AIM VCT PLC ("SECOND AIM VCT") 
 
9 JULY 2010 
 
RECOMMENDED PROPOSALS: 
 
      ·     TO REDESIGNATE THE SHARE CAPITAL OF IHT AIM VCT ("IHT AIM VCT SHARE 
REDESIGNATION"); 
 
      ·     TO MERGE IHT AIM VCT AND SECOND AIM VCT (TO BE COMPLETED PURSUANT TO 
SECTION 110 OF THE INSOLVENCY ACT 1986 ("THE SCHEME"); 
 
      ·     FOR AN OFFER FOR SUBSCRIPTION TO RAISE UP TO  GBP10 MILLION IN IHT AIM 
VCT ("OFFER") 
 
 
 (THE IHT AIM VCT SHARE REDESIGNATION, THE SCHEME AND THE OFFER (AND MATTERS 
RELATING THERETO) TOGETHER "THE PROPOSALS") 
 
SUMMARY 
 
The boards of IHT AIM VCT and Second AIM VCT announced on 13 January 2010 that 
they were in preliminary discussions on terms for a merger of the two 
companies.  Both boards are pleased to advise that discussions have concluded 
and they are today writing to set out the Proposals to their respective 
shareholders for consideration.  Both companies are managed by Octopus 
Investments Limited ("Octopus"). 
 
The Proposals will, if approved, result in a redesignation of the share capital 
of IHT AIM VCT, the merger of the companies and the fundraising by IHT AIM VCT, 
creating an Enlarged Company with net assets of approximately  GBP33 million 
(assuming full subscription under the Offer). 
 
IHT AIM VCT will redesignate its existing A ordinary shares as ordinary shares 
("New IHT AIM VCT Shares").  The IHT AIM VCT Redesignation is conditional on the 
approval of IHT AIM VCT shareholders and will take place whether or not the 
merger is approved and becomes effective. 
 
The merger will then be effected by Second AIM VCT being placed into members' 
voluntary liquidation pursuant to a scheme of reconstruction under Section 110 
of the Insolvency Act 1986.  Shareholders should note that the merger by way of 
the Scheme will be outside the provisions of the City Code on Takeovers and 
Mergers.  The merger will be completed on a relative net asset basis (unaudited 
net assets as at close of business on the day immediately preceding the 
Effective Date (as defined below) and the benefits shared by both sets of 
shareholders, with the costs being split proportionately based on the merger 
NAVs.  The Scheme is conditional on the approval of the shareholders of both 
companies and is subject to the IHT AIM VCT Share Redesignation having been 
completed. 
 
The merger also provides an opportunity to launch the Offer to raise up to  GBP10 
million to enable IHT AIM VCT to participate in opportunities for investment at 
a time in the UK economic cycle which the IHT AIM VCT board and Octopus believe 
to be advantageous and will open on 9 July 2010.  The Offer is conditional on 
the approval of the shareholders of IHT AIM VCT and is subject to the IHT AIM 
VCT Share Redesignation having been completed. 
 
The Scheme is not conditional on the Offer proceeding, or vice versa. 
 
The IHT AIM VCT Share Redesignation, the Scheme and the Offer require the 
approval of resolutions to be proposed at the IHT AIM VCT extraordinary general 
meeting to be held on 4 August 2010 ("IHT AIM VCT Extraordinary General 
Meeting") and, in respect of the Scheme only, the approval of resolutions to be 
proposed at the Second AIM VCT general meeting to be held on 4 August 2010 
("Second AIM VCT First General Meeting") and the Second AIM VCT general meeting 
to be held on 12 August 2010 ("Second AIM VCT Second General Meeting"). 
 
The board of IHT AIM VCT also considers it appropriate to adopt new articles of 
association, renew share issue and share repurchase authorities, approve the 
cancellation of the IHT AIM VCT share premium account and capital redemption 
reserve, as well as amend the investment policy and change the name of the 
company. It is also proposed to approve a related party transaction with Octopus 
in respect of its fee pursuant to the Offer, as referred to below. 
 
BACKGROUND 
 
IHT AIM VCT was launched in November 2005 and has raised  GBP23.6 million (net of 
expenses) since inception.  The current objective of IHT AIM VCT is to invest in 
a broad range of AIM or PLUS quoted companies in order to generate income and 
long-term capital growth. Investments are made selectively across a range of 
sectors in companies that have the potential to grow and enhance their value. 
IHT AIM VCT has returned  GBP8 million to its shareholders through dividends and 
share buy-backs.  As at 31 May 2010, IHT AIM VCT had investments in 35 companies 
with an aggregate value of  GBP7.5 million and unaudited net assets of  GBP10.0 
million (65.1p per share). As at today's date, IHT AIM VCT has 34 investments. 
 
Second AIM VCT was launched in June 2001 and has raised  GBP27.6 million (net of 
expenses) since inception. Second AIM VCT's objective is to provide its 
shareholders with tax-free dividends and long-term capital growth by investing 
in a diverse portfolio of AIM-listed companies. Second AIM VCT has returned  GBP7.2 
million to its shareholders through dividends and buy-backs. As at 31 May 2010, 
Second AIM VCT had unaudited net assets of  GBP13.1 million (31.0p per Second AIM 
VCT Share) and, in aggregate, investments in 40 companies.  As at today's date, 
Second AIM VCT has 38 investments. 
 
VCTs are required to be listed on the Official List, which involves a 
significant level of listing costs as well as related fees to ensure the VCT 
complies with all relevant legislation. As a VCT becomes fully invested, its net 
assets may start to decrease, primarily due to dividends, buy-backs and annual 
expenses. As a result, the running costs can become a proportionally greater 
burden which may have an adverse effect on the returns generated for 
shareholders. A larger VCT should, therefore, be better placed to spread such 
running costs across a larger investment portfolio and, as a result, may be able 
to pay a higher level of dividends to shareholders over its life. 
 
In September 2004, regulations were introduced allowing VCTs to be acquired by, 
or merge with, each other without prejudicing the VCT tax reliefs obtained by 
their shareholders. A number of VCTs have now taken advantage of these 
regulations. 
 
With the above in mind, the boards of IHT AIM VCT and Second AIM VCT entered 
into discussions to consider a merger of the companies to create a single larger 
VCT thereby establishing a platform from which further funds could be raised. 
The aim of the boards is to achieve strategic benefits and reductions in the 
annual running costs for both sets of shareholders. 
 
THE REDESIGNATION 
 
The IHT AIM VCT board proposes to redesignate the share capital of IHT AIM VCT 
to simplify its share capital following the return of the B ordinary fund in 
2009. The IHT AIM VCT Share Redesignation will be effected by redesignating A 
ordinary shares of 0.01p each to ordinary shares of 0.01p each. The number of 
shares in IHT AIM VCT held by an IHT AIM VCT shareholder and NAV per share will 
not change. 
 
THE MERGER PURSUANT TO THE SCHEME 
 
Both boards consider that this merger will bring significant benefits to both 
groups of shareholders through: 
 
  * a reduction in annual running costs for the Enlarged Company compared to the 
    total annual running costs of the separate companies; 
 
 
  * the creation of a single VCT of a more economically efficient size with a 
    greater capital base over which to spread administration, regulatory and 
    management costs; 
 
 
  * participation in a larger VCT with the longer term potential for a more 
    diversified portfolio thereby spreading the portfolio risk across a broader 
    range of investments and allowing for further investment in existing 
    portfolio companies; and 
 
 
  * providing the ability to maintain a buy-back programme and the potential 
    payment of further dividend distributions in the future due to the increased 
    size and reduced running costs of the Enlarged Company. 
 
 
The mechanism by which the merger will be completed is as follows: 
 
  * Second AIM VCT will be placed into members' voluntary liquidation pursuant 
    to a scheme of reconstruction under Section 110 IA 1986; and 
 
 
  * all of the assets and liabilities of Second AIM VCT will be transferred to 
    IHT AIM VCT in consideration for the issue of New IHT AIM VCT Shares (which 
    will be issued directly to shareholders of Second AIM VCT). 
 
 
Following the transfer, the listing of the Second AIM VCT Shares will be 
cancelled and Second AIM VCT will be wound up. 
 
The Scheme is conditional upon notice of dissent not having been received from 
Second AIM VCT shareholders holding more than 10 per cent. in nominal value of 
its issued share capital. 
 
Annual running costs, excluding management fees, for IHT AIM VCT and Second AIM 
VCT are approximately  GBP130,000 for each company or  GBP260,000 in total. These 
costs represent 1.3 per cent. of the IHT AIM VCT's unaudited net asset value and 
1.0 per cent. of Second AIM VCT's unaudited net asset value, in each case as at 
31 May 2010. Both boards consider that this level of continued administrative 
annual running costs can be materially reduced through the merger resulting in 
benefits to both groups of shareholders. 
 
The aggregate anticipated cost of undertaking the merger is approximately 
 GBP238,000, including VAT, legal and professional fees, stamp duty and the costs 
of winding up Second AIM VCT. The costs of the merger will be split 
proportionately between IHT AIM VCT and Second AIM VCT by reference to their 
respective merger NAVs. 
 
On the assumption that the NAV of the Enlarged Company will remain the same 
immediately after the merger (and disregarding the payment of the amount 
equivalent to three months' notice to the directors of Second AIM VCT and to 
Christopher Holdsworth Hunt who will resign as a director of IHT AIM VCT 
following the merger as these are one-off payments), annual cost savings for the 
Enlarged Company of at least  GBP120,000 per annum (representing 0.52 per cent. per 
annum of the expected net assets of the Enlarged Company) are anticipated to be 
achieved following completion of the merger. On this basis, and on the basis 
that no new funds are raised or investments realised to meet annual costs, both 
boards believe that the costs of the merger would, therefore, be recovered 
within 24 months. 
 
Both boards believe that the Scheme provides an efficient way of merging the 
companies with a lower level of costs compared with other merger routes. 
Although either of the companies could have acquired all of the assets and 
liabilities of the other, IHT AIM VCT was selected as the acquirer because its 
shares, compared to the Second AIM VCT shares, are currently trading at a larger 
discount to its NAV (and, therefore, a lower stamp duty cost on the 
consideration value on the transfer of all of the assets and liabilities from 
Second AIM VCT). It is also believed that there should be a saving in the annual 
running costs and a more efficient administration of a surviving company 
registered in England and Wales as opposed to Scotland. 
 
Second AIM VCT Shareholders who do not vote in favour of the resolution at the 
Second AIM VCT First General Meeting are entitled to dissent and have their 
shareholding purchased by the liquidators at the break value price of a Second 
AIM VCT Share. If the conditions of the Scheme are not satisfied, the companies 
will continue in their current form and each board will continue to review all 
options available to it regarding the future of their company. 
 
THE OFFER AND RELATED PARTY TRANSACTION 
 
The IHT AIM VCT board has decided to take the opportunity to also raise up to 
 GBP10 million through an offer for subscription of a maximum of 19,000,000 New IHT 
AIM VCT Shares. This will provide shareholders and other investors with the 
opportunity to invest in IHT AIM VCT and benefit from the tax reliefs available 
to qualifying investors in VCTs. 
 
The IHT AIM VCT board believe that: 
 
  * This is an advantageous time in the economic cycle with Octopus beginning to 
    see a strengthening pipeline of investment opportunities, at a time when 
    prices of assets are still low by historic standards. Funds raised under the 
    Offer will be invested, in part, to take advantage of any rally in 
    valuations and performance of smaller companies as the pace of economic 
    growth accelerates; 
 
 
  * The Offer should enable IHT AIM VCT to maintain its portfolio 
    diversification and continue to maximise the use of funds raised before 6 
    April 2006 for investment in VCT qualifying investments with gross assets of 
    up to  GBP15 million prior to the investment. IHT AIM VCT maintains a policy of 
    distributing realised profits to its shareholders as well as operating a 
    share buy-back scheme and there is a risk that over time the size of IHT AIM 
    VCT will shrink leaving less funds available for new investments to generate 
    future returns. The Offer should, therefore, also provide funds for new 
    investments as well as maintaining liquidity for dividends and buy-backs; 
 
 
  * New offers by VCTs continue to offer attractive tax incentives for private 
    investors when compared to other types of tax efficient investment; and 
 
 
  * The fixed running costs of IHT AIM VCT will be spread over a larger asset 
    base, thereby reducing costs as a percentage of IHT AIM VCT's assets. 
 
 
New IHT AIM VCT Shares issued under the Offer will be at an Offer price equal to 
the most recently published NAV of an IHT AIM VCT Share, divided by 0.945 to 
take into account Offer costs of 5.5 per cent. and rounded up to the nearest 
0.1p per share. The net proceeds of the Offer will be invested in accordance 
with the investment policy of IHT AIM VCT. 
 
Octopus will act as promoter to the Offer and be paid a commission of 5.5 per 
cent of the gross proceeds raised from which all costs and expenses will be paid 
(including initial intermediary commission and trail commission). Any costs 
above this will be met by Octopus. 
 
The arrangement to pay a commission of 5.5 per cent., which is being entered 
into with Octopus which (as an entity which exerts significant influence over 
the IHT AIM VCT and as the investment manager of IHT AIM VCT which is a 
closed-ended investment fund) is a 'related party' of IHT AIM VCT under the 
Listing Rules, constitutes a related party transaction requiring the approval of 
IHT AIM VCT shareholders pursuant to the Listing Rules. The Offer is 
conditional, therefore, on the approval of this related party transaction at the 
IHT AIM VCT Extraordinary General Meeting by Shareholders. 
 
OCTOPUS 
 
Octopus currently manages 16 VCTs, more than any other fund manager. Financial 
advisers voted Octopus "Best VCT Provider of the Year" at the Professional 
Adviser awards in each of 2007, 2008, 2009 and 2010. The Quoted Small-Cap 
Investment Team is one of the most seasoned in the UK small-cap sector with over 
80 years of collective experience. It is also one of the largest AIM VCT 
specialists. The team sits alongside the rest of the Quoted Team at Octopus 
which has a total of  GBP945 million under management. 
 
MANAGEMENT, ADMINISTRATION AND PERFORMANCE INCENTIVE ARRANGEMENTS 
 
Octopus is the investment manager of IHT AIM VCT and of Second AIM VCT and also 
provides administration and secretarial services to both companies.  An annual 
management and administration fee is payable to Octopus by IHT AIM VCT and 
Second AIM VCT of an amount equivalent to 2 per cent. of the net assets of each 
relevant company (exclusive of VAT, if any). 
 
Octopus will continue to provide investment management and administration 
services to the Enlarged Company following the merger on the same annual fee 
basis as above for IHT AIM VCT (ie an amount equivalent to 2 per cent. of the 
net assets of IHT AIM VCT (exclusive of VAT, if any). 
 
In support of the merger, and so that all gains may remain with shareholders, 
Octopus has already agreed to forego all future performance incentive fee 
payments by both IHT AIM VCT and Second AIM VCT and the existing entitlements 
have, therefore, been terminated. 
 
THE IHT AIM VCT BOARD 
 
Both boards have discussed and considered the size and future composition of the 
IHT AIM VCT board and it has been agreed that Christopher Holdsworth Hunt will 
resign as a director of IHT AIM VCT and Elizabeth Kennedy and Alastair Ritchie 
(directors of Second AIM VCT) will be appointed as directors of IHT AIM VCT. 
 
The current annual directors' fees for AIM VCT and Second AIM VCT are  GBP42,000 
per company (plus applicable employers National Insurance Contributions). 
Although the aggregate annual remuneration for the IHT AIM VCT board following 
the merger will increase to  GBP55,000 (plus applicable employers National 
Insurance Contributions) due to the additional director, the total of the 
directors' fees across the two companies will reduce by  GBP29,000 per annum. This 
is disregarding the payment of an amount equal to three months' notice to each 
of the directors of Second AIM VCT as final directors' fees whilst Second AIM 
VCT is in liquidation - the Second AIM VCT directors have agreed to waive all 
further directors' fees in respect of Second AIM VCT if the Scheme becomes 
effective - and to Christopher Holdsworth Hunt who will, if the Scheme becomes 
effective, resign as a director of IHT AIM VCT. 
 
AMENDMENT TO THE IHT AIM VCT ARTICLES 
 
The IHT AIM VCT board proposes to adopt new articles of association to reflect 
the IHT AIM VCT Share Redesignation, as well as take the opportunity to update 
the IHT AIM VCT's articles of association to reflect the new provisions 
introduced by the Companies Act 2006 and shareholder regulations which have come 
into force over the last two years and market practice. 
 
AMENDMENT TO THE IHT AIM VCT INVESTMENT POLICY 
 
The IHT AIM VCT board believe that there may be opportunities to invest in 
companies that seek pre-IPO funds, participation in which would be in the 
interest of its shareholders.  The IHT AIM VCT board have, therefore, proposed a 
resolution at the IHT AIM VCT Extraordinary General Meeting to sanction this by 
amending the investment policy of IHT AIM VCT. 
 
IHT AIM VCT SHARE ISSUE AND REPURCHASE AUTHORITIES AND CANCELLATION OF THE IHT 
AIM VCT SHARE PREMIUM ACCOUNT AND CAPITAL REDEMPTION RESERVE 
 
In order to implement the merger, the IHT AIM VCT board will need to be 
authorised to issue New IHT AIM VCT Shares pursuant to the Scheme.  It is also 
proposed to renew and increase shareholder authorities at the IHT AIM VCT 
Extraordinary General Meeting to issue shares (having disapplied pre-emption 
rights) for the purposes of the Offer and other general purposes and make market 
purchases of shares. 
 
The issue of New IHT AIM VCT Shares pursuant to the Scheme and the Offer will 
result in the creation of further share premium. The IHT AIM VCT board considers 
it appropriate to obtain approval of shareholders at the IHT AIM VCT 
Extraordinary General Meeting to cancel the share premium account and the 
capital redemption reserve to create (subject to court sanction) further 
distributable reserves to fund distributions to Shareholders and buy-backs, to 
set off or write off losses and for other corporate purposes. 
 
EXPECTED TIMETABLE 
 
The Scheme 
 
IHT AIM VCT Extraordinary General Meeting           11.30 am 4 August 2010 
 
Second AIM VCT First General Meeting                12.00 pm 4 August 2010 
 
Effective date of the IHT AIM VCT Share             4 August 
Redesignation 
 
Second AIM VCT register of members closed           11 August 2010 
 
Calculation date for the Scheme                     after 5.00 pm 11 August 2010 
 
Suspension of listing of Second AIM VCT Shares      after 7.30 am 12 August 2010 
 
Second AIM VCT Second General Meeting               12.00 pm 12 August 2010 
 
Effective Date for the transfer of assets and       12 August 2010 
liabilities of Second AIM VCT to IHT AIM VCT and 
issue of New IHT AIM VCT Shares 
 
Announcement of results of the meetings and         12 August 2010 
completion of the Scheme (if applicable) 
 
Cancellation of the Second AIM VCT share listing    after 8.00 am 13 March 2010 
 
Admission of and dealings in the New IHT AIM VCT    13 August 2010 
Shares issued pursuant to the Scheme to commence 
 
Certificates for New IHT AIM VCT Shares (arising    25 August 2010 
from the IHT AIM VCT Share Redesignation or issued 
pursuant to the Scheme) dispatched 
 
The Offer 
 
Offer opens                                 9 July 2010 
 
Allotment of New IHT AIM VCT Shares         Monthly 
 
Admission of and dealings in New IHT AIM    3 business days following allotment 
VCT Shares issued pursuant to the Offer to 
commence 
 
Certificates for New IHT AIM VCT Shares     within 14 business days of allotment 
pursuant to the Offer dispatched 
 
Offer closes*                               30 April 2011 
 
*The Offer will close earlier than the date stated above if it is fully 
subscribed. The IHT AIM VCT directors reserve the right to close the Offer 
earlier or to extend the Offer and to accept applications and issue New IHT AIM 
VCT Shares at any time prior to or after the closing date. 
 
DOCUMENTS AND APPROVALS 
 
IHT AIM VCT shareholders will receive a copy of a circular convening the IHT AIM 
VCT Extraordinary General Meeting to be held on 4 August 2010 (together with the 
IHT AIM VCT prospectus) at which IHT AIM VCT shareholders will be invited to 
approve resolutions in connection with the Proposals. 
 
Second AIM VCT shareholders will receive a circular convening the Second AIM VCT 
First General Meeting on 4 August 2010 and the Second AIM VCT Second General 
Meeting on 12 August 2010 (together with the IHT AIM VCT prospectus) at which 
Second AIM VCT shareholders will be invited to approve resolutions in connection 
with the Scheme. 
 
Copies of the IHT AIM VCT prospectus and the circular for IHT AIM VCT and Second 
AIM VCT have been submitted to the UK Listing Authority and will be shortly 
available for inspection at the UK Listing Authority's Document Viewing Facility 
which is situated at: 
 
Financial Services Authority 
25 The North Colonnade 
Canary Wharf 
London E14 5HS 
Telephone: 0207 066 1000 
 
Investment Manager and Administrator for IHT AIM VCT and Second AIM VCT 
Octopus Investments Limited 
Andrew Buchanan or Kate Tidbury 
Telephone: 0800 316 2349 
 
Company Secretary for IHT AIM VCT and Second AIM VCT 
Celia Whitten 
Telephone: 020 7710 2849 
 
Solicitors to IHT AIM VCT and Second AIM VCT 
Martineau 
Kavita Patel 
Telephone: 0870 763 2000 
 
Sponsor to IHT AIM VCT 
Charles Stanley Securities 
Ben Johnston/Mark Taylor 
Telephone: 020 7149 6000 
 
The directors and proposed directors of IHT AIM VCT accept responsibility for 
the information relating to IHT AIM VCT, its directors and proposed directors 
contained in this announcement.  To the best of the knowledge and belief of such 
directors and proposed directors (who have taken all reasonable care to ensure 
that such is the case), the information relating to IHT AIM VCT, its directors 
and proposed directors contained in this announcement, for which they are solely 
responsible, is in accordance with the facts and does not omit anything likely 
to affect the import of such information. 
 
The directors of Second AIM VCT accept responsibility for the information 
relating to Second AIM VCT and its directors contained in this announcement. To 
the best of the knowledge and belief of such directors (who have taken all 
reasonable care to ensure that such is the case), the information relating to 
Second AIM VCT and its directors contained in this document, for which they are 
solely responsible, is in accordance with the facts and does not omit anything 
likely to affect the import of such information. 
 
Martineau are acting as legal advisers for IHT AIM VCT and Second AIM VCT and 
for no one else in connection with the matters described herein and will not be 
responsible to anyone other than IHT AIM VCT and Second AIM VCT for providing 
the protections afforded to clients of Martineau or for providing advice in 
relation to the matters described herein. 
 
Charles Stanley Securities, a division of Charles Stanley & Co Limited, which is 
authorised and regulated in the United Kingdom by the Financial Services 
Authority, is acting as sponsor for IHT AIM VCT and no one else and will not be 
responsible to any other person for providing the protections afforded to 
customers of Charles Stanley Securities or for providing advice in relation to 
any matters referred to herein. 
 
 
 
[HUG#1430716] 
 
 
 
 
 
 
 
 
This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. 
The owner of this announcement warrants that: 
(i) the releases contained herein are protected by copyright and other applicable laws; and 
(ii) they are solely responsible for the content, accuracy and originality of the information contained therein. 
All reproduction for further distribution is prohibited. 
 
Source: Octopus Second AIM VCT PLC via Thomson Reuters ONE 
 

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