Foresight 4 VCT PLC : PROPOSALS TO MERGE FORESI...

JOINT ANNOUNCEMENT

FORESIGHT 4 VCT PLC ("FORESIGHT 4")
FORESIGHT 5 VCT PLC ("FORESIGHT 5")
ACUITY VCT 3 PLC ("ACUITY 3")
FORESIGHT CLEARWATER VCT PLC ("FORESIGHT CLEARWATER")

22 DECEMBER 2011

RECOMMENDED PROPOSALS TO MERGE FORESIGHT 4, FORESIGHT 5, ACUITY 3 AND FORESIGHT CLEARWATER (TOGETHER THE "COMPANIES" AND EACH A "COMPANY") (TO BE COMPLETED PURSUANT TO SECTION 110 OF THE INSOLVENCY ACT 1986 ("IA 1986")

SUMMARY

The boards of Foresight 4, Foresight 5, Acuity 3 and Foresight Clearwater (together the "Boards" and each a "Board") announced on 7 October 2011 that they had agreed terms in principle to merge each of Foresight 5, Acuity 3 and Foresight Clearwater (together the "Target VCTs") into Foresight 4. The Boards are pleased to advise that discussions have now concluded and they are today writing to set out the merger proposals to their respective shareholders for consideration. All of the Companies are managed by, and will continue to be managed by Foresight Group CI Limited ("Foresight").

The merger will be effected by each of the Target VCTs being placed into members' voluntary liquidation pursuant to a scheme of reconstruction under Section 110 of the Insolvency Act 1986 ("Schemes" and each a "Scheme"). Shareholders should note that the merger by way of the Schemes will be outside the provisions of the City Code on Takeovers and Mergers. The merger will be completed on a relative net asset value 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 all sets of shareholders.

Each Scheme is conditional on the approval of the shareholders of the relevant Company however, each Scheme is not conditional on the other Schemes being so approved and will, therefore, proceed independently and irrespective of the other Schemes.

Foresight 5 and Acuity 3 (which have substantially common portfolios) will be merged into a new separate C Shares fund within Foresight 4 with an opening NAV of £1 per share. The Foresight 4 C Shares will be managed separately to the existing Foresight 4 Ordinary Shares fund for approximately three years, at which point the Foresight 4 C Shares will be merged with the Foresight 4 Ordinary Shares fund on a relative net asset value basis using the audited net asset values of each fund as at 31 March 2015.

Foresight Clearwater, as its assets materially comprise cash or near cash, will be merged directly into the Foresight 4 Ordinary Shares fund on a relative net asset value basis.

The merger will, if effected, result in an enlarged company ("Enlarged Company") with net assets of over £60 million. Based on the estimated costs of the merger and the expected normalised annual cost savings for the Enlarged Company, the Boards believe that the costs of the merger would be recovered within 12 months.

Proposals will also be put to Foresight 4 shareholders to change the investment policy of Foresight 4, amend the articles of association to provide for a new class of Foresight 4 C Shares, issue shares pursuant to the Schemes, renew share issue and buy back authorise and to cancel reserves.

BACKGROUND

Foresight 4 was launched in 1998 and was originally managed by Advent Limited. Foresight Group LLP took over the management of Foresight 4 in 2004 (as subsequently novated to Foresight). As at 30 September 2011, Foresight 4 had unaudited net assets of £40,006,672 (109.6p per Foresight 4 Ordinary Share) and, in aggregate, venture capital investments in 29 companies with a carrying value of £33.1 million.

Foresight 5 (formerly Acuity Growth VCT plc) was launched in 2004 and has two classes of shares (Foresight 5 Ordinary Shares and Foresight 5 C Shares). Foresight took over the management of Foresight 5 from Acuity Capital Management Limited in March this year. A full review and assessment of the Foresight 5 investment portfolio was carried out by Foresight following its appointment resulting in a substantial reduction in the net assets of Foresight 5 to reflect the performance and funding requirements of the portfolio as announced in June 2011. Peter Dicks was appointed a director of Foresight 5 in August this year (following the completion of a top-up offer which closed in the same month and raised £761,530, before costs). As at 30 September 2011, Foresight 5 had unaudited net assets of £10,852,222 (17.4p per Foresight 5 Ordinary Share and 60.7p per Foresight 5 C Share) and, in aggregate, venture capital investments in 11 companies with a carrying value of £10.2 million.

Acuity 3 was launched in 2005. Foresight took over the management of Acuity 3 from Acuity Capital Management Limited in March this year. As with Foresight 5, Foresight has carried out a full review and assessment of the Acuity 3 investment portfolio following its appointment, resulting in a substantial reduction in the net assets of Acuity 3 to reflect the performance and funding requirements of the portfolio as announced in June 2011. As at 30 September 2011, Acuity 3 had unaudited net assets of £7,801,500 (22.7p per Acuity 3 Share) and, in aggregate, venture capital investments in 10 companies with a carrying value of £7.7 million.

Foresight Clearwater is a new VCT launched in 2010, the original offer for subscription having closed on 12 December this year raising £1.7 million. Peter Dicks has been a director of Foresight Clearwater since launch. The Foresight Clearwater Board believes that, at this level of subscription, the merger at the current time presents a better opportunity to pursue the original investment strategy than if it were to remain as a standalone VCT.

VCTs are required to be listed on the premium segment of the Official List, which involves a significant level of listing costs as well as related fees to ensure they comply with all relevant legislation. A larger VCT should be better placed to spread such running costs across a larger asset base, facilitate better liquidity management and, as a result, may be able to maximize investment opportunities and 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 taken advantage of these regulations to create larger VCTs for economic and administration efficiencies, as well as to improve portfolio diversification.

With the above in mind, the Boards have been considering merger opportunities to create a single, larger VCT. The aim of the Boards is to achieve long-term strategic benefits and reductions in the annual running costs for shareholders.

CHANGE TO THE INVESTMENT POLICY OF FORESIGHT 4

It is proposed to change the investment policy of Foresight 4 to provide for a more generic policy of investing in unquoted companies and to remove specific VCT investment requirements which are continually changing. The proposed change to the investment policy will also better encompass the investments which are intended to be acquired by Foresight 4 from the Target VCTs and Foresight 4 having two classes of shares following the merger. Each Scheme is conditional on Foresight 4 shareholders approving the proposed change to the investment policy.

THE MERGER PURSUANT TO THE SCHEME

The mechanism by which the merger will be completed is as follows:

·   each Target 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 each Target VCT will be transferred to Foresight 4 in consideration for the issue of new shares (which will be issued directly to the shareholders of the relevant Target VCT).

The relative net asset values will be the unaudited net asset values of the relevant share classes of the Companies as at the Calculation Date (this being 3 February 2012), adjusted to take into consideration that fund's allocation of the estimated merger costs. Foresight and Foresight Group LLP (the manager and administrator respectively) have agreed, subject to the Foresight Clearwater Scheme becoming effective, to make a contribution to Foresight Clearwater so as to bring its NAV to 94.5p per share immediately prior to the calculation of its roll-over value. This contribution will be in the form of a waiver of fees and, if required, a cash payment commitment.

The merger will result in the creation of an Enlarged Company and should result in savings in running costs and simpler administration. As all of the Companies, subject to the change to the investment policy of Foresight 4 being approved by Foresight 4 shareholders, will have similar investment policies and are managed by Foresight, this is achievable without material disruption to the Companies and their combined portfolio of investments.

The Boards consider that this merger will bring a number of benefits to all shareholders through:

·   a reduction in annual running costs for the Enlarged Company compared to the aggregate 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 annual running costs;

·   amalgamation of the Foresight 5 and Acuity 3 portfolios, which are substantially the same, for efficient management and administration;

·   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 creating an increased ability to support follow-on investments and new investments; and

·   the potential to enhance the ability to pay dividends and buy back shares in the future due to the increased size and reduced running costs of the Enlarged Company, as well as improve liquidity in the secondary market as it is hoped a larger vehicle will attract increased interest.

The aggregate anticipated cost of undertaking the merger is approximately £462,000, including VAT, legal and professional fees, stamp duty and the costs of winding up the Target VCTs. The costs of the merger will be split in the following proportions: 40% for Foresight 4; 30% for Foresight 5 (allocated between the Foresight 5 Ordinary Shares fund and Foresight 5 C Shares fund in accordance with their respective roll-over values ignoring costs); 20% for Acuity 3; and 10% for Foresight Clearwater (this being what the Boards consider to be a fair allocation of merger costs reflecting the underlying net assets of the company and the rational for each company to undertake such a merger).

On the assumption that immediately after the merger the NAV of the Ordinary Shares fund will remain the same (including the contribution from Foresight and Foresight LLP (the manager and administrator respectively) to Foresight Clearwater so as to bring its NAV to 94.5p per Foresight Clearwater Share) and continues to be £1 in respect of the C Shares fund, the reduction in the normalised annual costs for the Enlarged Company are estimated to be at least £475,000 per annum. This would represent 0.8% per annum of the expected net assets of the Enlarged Company. On this basis, and assuming that no new funds are raised or investments realised to meet annual costs, the Foresight 4 Board believes that the costs of the merger would, be recovered within 12 months.

The Boards believe that the Schemes provide an efficient way of merging the Companies with a lower level of costs compared with other merger routes. Foresight 4 was selected as the acquirer being the largest of the Companies and being the most mature.

ILLUSTRATIVE TERMS

As an illustration, had the merger been completed on 30 September 2011, the following number of shares in the Target VCTs would effectively have been exchanged for such number of new Foresight 4 Ordinary Shares or Foresight 4 C Shares as follows:

	Number of New Shares	Class of Share
F5 Ordinary Share	0.173550	Foresight 4 C Share
F5 C Share	0.605360	Foresight 4 C Share
Acuity 3	0.227057	Foresight 4 C Share
Foresight Clearwater	0.825433	Foresight 4 Ordinary Share

The actual merger ratio will be calculated on the Calculation Date in accordance with the merger terms.

THE FORESIGHT 4 BOARD

The Foresight 4 Board will continue in its current form (Peter Dicks, a director of Foresight 4, is also a director of Foresight 5 and Foresight Clearwater and, therefore, will bring recent knowledge and experience of these Targets VCTs to the Enlarged Company).

FORESIGHT 4 SHARE ISSUE AND BUY BACK AUTHORITIES

Foresight 4 also proposes to renew and increase its authorities to issue shares (having disapplied pre-emption rights) for general purposes and make market purchases of shares reflecting the increased share capital of Foresight 4 following the merger and the two separate share classes. These are general annual authorities taken each year for the purposes of the dividend reinvestment scheme, small top up offers and the buyback policy.

CANCELLATION OF THE SHARE PREMIUM ACCOUNT AND THE CAPITAL REDEMPTION RESERVE

Cancelling share premium and capital redemption reserves allows a company to create a special reserve that can assist in writing off losses, which will enhance the ability to make distributions. It also facilitates a company's ability, where required, to implement share buybacks. Foresight 4 has previously cancelled share premium for these purposes but the issue of Foresight 4 Ordinary Shares and Foresight 4 C Shares pursuant to the Schemes will result in the creation of further share premium. In addition, Foresight 4 has existing capital redemption reserves resulting from buybacks undertaken by the Company.

The Foresight 4 Board, therefore, also proposes to seek the approval of Foresight 4 shareholders to cancel the amounts standing to the credit of the share premium account and the capital redemption reserve, subject to the sanction of the Court.

EXPECTED TIMETABLE

Foresight 4 First General Meeting       10.00 a.m. on 26 January 2012

Foresight 5 First General Meeting       10.30 a.m. on 26 January 2012

Foresight Clearwater First General Meeting     11.00 a.m. on 26 January 2012

Acuity 3 First General Meeting       5.00 p.m. on 26 January 2012

Target VCTs' register of members closed     5.00 p.m. on 3 February 2012

Calculation date for the Schemes       after 5.00 pm 3 February 2012

Suspension of listing of Target VCTs' shares     7.30 am 6 February 2012

Foresight 5 Second General Meeting     10.00 a.m. on 6 February 2012

Acuity 3 Second General Meeting       10.30 a.m. on 6 February 2012

Foresight Clearwater Second General Meeting   11.00 a.m. on 6 February 2012

Effective Date for the transfer of assets     6 February 2012
and liabilities of the Target VCTs to Foresight 4
and the issue of Foresight 4 new shares

Announcement of results of the Schemes     6 February 2012

Admission of and dealings in the Foresight 4     7 February 2012
new shares issued pursuant to the Schemes to
commence  

Certificates for New Shares issued pursuant     14 February 2012
to the Schemes dispatched

Cancellation of the Target VCTs' share listing   8.00 a.m. 6 March 2012

DOCUMENTS AND APPROVALS

Foresight 4 shareholders will receive a copy of a circular convening the Foresight 4 general meeting to be held on 26 January 2012 (together with the Foresight 4 prospectus) at which Foresight 4 shareholders will be invited to approve resolutions in connection with the change to the investment policy, the Schemes, the creation of and authority to issue Foresight 4 C Shares, the renewal and increase of the general authorities to issue and repurchase shares and to cancel the share premium account and capital redemption reserve.

Target VCTs' shareholders will receive a circular convening the relevant Target VCTs' first general meeting on 26 January 2012 and the relevant Target VCTs' second general meeting on 6 February 2012 (together with the Foresight 4 prospectus) at which relevant Target VCTs' shareholders will be invited to approve resolutions in connection with the relevant Schemes.

Copies of the Foresight 4 prospectus and the circulars for Foresight 4, Foresight 5, Acuity 3 and Foresight Clearwater have been submitted to the UK Listing Authority and will be shortly available for download both from Foresight's website (www.foresightgroup.eu) and the national storage mechanism (www.hemscott/nsm.do).

Company Secretary for the Companies
Foresight Fund Managers Limited
Gary Fraser
Telephone: [phone]

Solicitors to the Companies
SGH Martineau LLP
Kavita Patel
Telephone: [phone]

Sponsor to Foresight 4
BDO LLP
Susan Brice
Telephone: [phone]

The directors of Foresight 4 accept responsibility for the information relating to Foresight 4 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 Foresight 4 and its directors contained in this announcement, for which they are solely responsible, is in accordance with the facts and does not omit anything likely to affect the import of such information.

The directors of Foresight 5 accept responsibility for the information relating to Foresight 5 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 Foresight 5 and its directors contained in this announcement, for which they are solely responsible, is in accordance with the facts and does not omit anything likely to affect the import of such information.

The directors of Acuity 3 accept responsibility for the information relating to Acuity 3 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 Acuity 3 and its directors contained in this announcement, for which they are solely responsible, is in accordance with the facts and does not omit anything likely to affect the import of such information.

The directors of Foresight Clearwater accept responsibility for the information relating to Foresight Clearwater 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 Foresight Clearwater and its directors contained in this announcement, for which they are solely responsible, is in accordance with the facts and does not omit anything likely to affect the import of such information.

SGH Martineau LLP are acting as legal adviser to the Companies and for no one else in connection with the matters described herein and will not be responsible to anyone other than the Companies for providing the protections afforded to clients of Martineau or for providing advice in relation to the matters described herein.

BDO LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as sponsor for Foresight 4 and no one else and will not be responsible to any other person for providing the protections afforded to customers of BDO LLP or for providing advice in relation to any matters referred to herein.

---

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.

Source: Foresight 4 VCT PLC via Thomson Reuters ONE

HUG#1573502