CORRECTION: Publication of a Prospectus and Cir...

 

INCORRECT HEADLINE: Words added:  "and an offer for subscription by the Companies" 

Octopus Titan VCT 1 plc ("Titan 1")
Octopus Titan VCT 2 plc ("Titan 2") 
Octopus Titan VCT 3 plc ("Titan 3") 
Octopus Titan VCT 4 plc ("Titan 4") 
Octopus Titan VCT 5 plc ("Titan 5") 

(together the "Companies" and Titan 1, Titan 3, Titan 4 and Titan 5 together "Titan 1, 3, 4 and 5" and each a "Target VCT")

16 September 2014

Publication of a Prospectus (the "Prospectus") and Circulars (the "Circulars") in connection with recommended proposals to merge the Companies (to be completed pursuant to a scheme of reconstruction under section 110 Insolvency Act 1986) and an offer for subscription by the Companies   

The boards of the Companies (the "Boards") announced on 3 September 2014 that the terms for the merger of the Companies into one company (the "Enlarged Company") had been agreed in principle (the "Merger" or "Scheme"). The Boards are pleased to advise that discussions have now concluded and that the Companies have today issued the Circulars to set out the proposals for the Merger for consideration by their respective shareholders. Each of the Companies is managed by Octopus Investments Limited ("Octopus").

The Merger will be completed by Titan 1, 3, 4 and 5 each 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 will be outside the provisions of the City Code on Takeovers and Mergers.

The Merger will be completed on a relative net asset basis and the benefits shared by each set of shareholders, with the costs being split proportionately based on their respective merger net asset values. The Merger requires the approval of resolutions by the Companies' shareholders.

The Companies are also seeking to raise £50 million under an offer for subscription for new ordinary shares ("Offer Shares"), with an over allotment facility of a further £20 million (the "Offer"), split equally in respect of each allotment between those Companies participating in the Offer at the time of that allotment. Participation by each of the Companies in the Offer is subject to the approval of its shareholders and, in the case of Titan 1, 3, 4 and 5, participation in respect of any allotment is conditional on the Scheme not having taken place prior to the time of that allotment.

Titan 2 is also seeking the approval of shareholders of an offer agreement relating to the Offer (the "Offer Agreement") and a deed of variation to its existing management and administration agreements with Octopus, being arrangements with Octopus which is a related party under the Listing Rules, and a change of its name to Octopus Titan VCT plc if the Merger proceeds.

Background
Titan 2 was launched in October 2007 and has been managed by the Octopus team since inception. Octopus was launched in March 2000.

The latest unaudited NAV of Titan 2, taken from its unaudited management accounts to 31 July 2014, was 91.6p per share, and the latest unaudited NAVs of Titan 1, 3, 4 and 5, taken from their respective unaudited management accounts to 31 July 2014, was 91.6p per share, 91.4p per share, 102.8p per share and 91.8p per share respectively.

The table below sets out the unaudited NAVs of the Companies and provides further detail on the venture capital investments in their portfolios as at that date.

Company	Net Assets (unaudited) (£)	NAV per share (unaudited) (p)	Number of venture capital investments	Carrying value of the venture capital investments (£)	Total Return (p)
Titan 1	29,981,847	91.6	37	21,703,823	139.1
Titan 2	29,974,279	91.6	37	21,703,823	139.1
Titan 3	33,167,724	91.4	37	26,006,640	127.4
Titan 4	40,258,949	102.8	35	32,319,093	107.8
Titan 5	28,669,345	91.8	30	16,306,512	91.8

The Companies have the same overall investment objective and policy of providing their shareholders with an attractive income and capital return by investing their finds in a broad spread of unquoted UK companies which meet the relevant criteria for venture capital trusts ("VCTs").

VCTs are required to be traded on a European Union/European Economic Area regulated market. The Companies are 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. The Enlarged Company should be better placed to spread such running costs across a larger asset base and facilitate better liquidity management and, as a result, may be able to maximise investment opportunities and sustain a higher level of dividends to shareholders over its life.

In September 2004, the Merger 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.

In addition, the changes announced to the VCT investment limits and size test, in particular the removal of the £1 million per annum investment limit per VCT in an investee company, will reduce the need for sister VCTs to co-invest in order to participate in larger investments (effective for investments made on or after 6 April 2012).

The Merger is expected to cost approximately £1 million and deliver annual cost savings of approximately £0.5 million and will bring a number of additional benefits to existing and future including:

• amalgamation of the Companies' portfolio assets, many of which are commonly held, 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;
• 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;
• efficiencies in annual running costs for the Enlarged Company compared to the separate companies;
• enhancing the ability of the Enlarged Company to raise new funds, as well as pay dividends and support buy backs in the future;
• the potential for greater liquidity in the secondary market;
• the removal of potential conflicts relating to the Companies' portfolio investments;
• streamlining communications with shareholders; and
• improving risk management in respect of compliance with the VCT rules.

The Scheme

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

• Titan 1, 3, 4 and 5 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 Titan 1, 3, 4 and 5 will be transferred to Titan 2 in consideration for the issue of new ordinary shares ("Scheme Shares") (to be issued directly to Titan 1, 3, 4 and 5 shareholders).

The Scheme will be completed on a relative audited NAV basis, adjusted for the anticipated costs of the Scheme. The calculation of the NAV of the Titan VCTs will take into account any subscription monies received by the Titan VCTs under the Offer prior to the Merger. The Merger Value and the Titan 1, 3, 4 and 5 Roll-Over Values will be based on the latest unaudited valuations of the Titan VCTs' investee companies. In addition, independent valuations will be carried out of those unquoted investee companies into which the Titan VCTs have not invested in the previous 12 month period and which are more than 5% of any of the value of any of the Titan VCTs. The effect of the Scheme will be that the Titan 1, 3, 4 and 5 Shareholders will receive Titan 2 Shares with the same total value as their Titan 1, 3, 4 and 5 Shares.

The Scheme is conditional upon its approval by the Titan 2 shareholders and by the Titan 1, 3, 4 and 5 shareholders, as well as the other conditions set out in each of the Prospectus and Circulars.

As the Companies have the same investment objective and policy, the same investment manager and other common advisers, the proposed Merger should be achievable without major additional cost or disruption to the Companies and their combined portfolio of investments.

Offer Agreements
Pursuant to the Offer Agreements, Octopus will receive:

• a fee of up to 5.5% of the gross proceeds received by the Companies under the Offer (comprising an initial charge of 3 % of the gross funds raised and an initial commission of up to 2.5% of gross funds raised from investors who have not invested their money through a financial intermediary ("Direct Investors")); and
   
• an additional ongoing charge of 0.5% of the net asset value of the investment amounts received by the Companies from Direct Investors, payable for up to nine years, provided the Direct Investors continue to hold the shares.

Expected Timetable for the Offer

Titan 2

Latest time and date for receipt of Forms of Proxy for the Titan 2 General Meeting	11.00 am on 14 October 2014
Titan 2 General Meeting	11.15 am on 16 October 2014
Scheme Calculation Date	after 5.00 pm on 27 October 2014
Scheme Effective Date for the transfer of the assets and liabilities of Titan 1, 3, 4 and 5 to Titan 2 and the issue of Scheme Shares	28 October 2014
Announcement of the results of the Scheme	28 October 2014
Admission of, and dealings in, Scheme Shares issued to commence	29 October 2014
CREST accounts credited (if applicable)	29 October 2014
Certificates for Scheme Shares dispatched to Titan 1, 3, 4 and 5 Shareholders	Week commencing 17 November 2014

Titan 1, 3, 4 and 5

Latest time for receipt of forms of proxy for the Titan 1, 3, 4 and 5 First General Meetings	11.00 am on 14 October2014
Titan 1 First General Meeting Titan 3 First General Meeting Titan 4 First General Meeting Titan 5 First General Meeting	11.30 am on 16 October2014  2.15 pm on 16 October2014  11.45 am on 16 October2014  2.30 pm on 16 October2014
Latest time for receipt of forms of proxy for the Titan 1, 3, 4 and 5 Second General Meetings	10.45 am on 24 October2014
Titan 1, 3, 4 and 5 register of members closed	27 October2014
Final expected date of trading of the Titan 1, 3, 4 and 5 shares	27 October 2014
Scheme Record Date for Titan 1, 3, 4 and 5 Shareholders' entitlements under the Scheme	5.00 pm on 27 October 2014
Scheme Calculation Date	after 5.00 pm on 27 October 2014
Dealings in Titan 1, 3, 4 and 5 Shares suspended	7.30 am on 28 October 2014
Titan 1 Second General Meeting Titan 3 Second General Meeting Titan 4 Second General Meeting Titan 5 Second General Meeting	11.30 am on 28 October 2014 11.15 am on 28 October 2014 11.00 am on 28 October 2014 10.45 am on 28 October 2014
Scheme Effective Date for the transfer of the assets and liabilities of Titan 1, 3, 4 and 5 to the Company and the issue of Scheme Shares *	28 October 2014
Announcement of the results of the Scheme	28 October 2014
Cancellation of the Titan 1, 3, 4 and 5 Shares' listing	8.00 am on 29 October 2014

(*The final expected date of trading of the Titan 1, 3, 4 and 5 Shares will be 27 October 2014. See the timetable for Titan 2 with regard to admission, CREST accounts being credited and certificates being dispatched in respect of the Scheme Shares)

Expected Timetable for the Offer

Launch date of the Offer	16 September 2014
Deadline for receipt of applications for final allotment in 2014/15 tax year	12 noon on 1  April 2015
Deadline for receipt of applications for final allotment in 2015/16 tax year	12 noon on 1 September 2015
First allotments under the Offer	17 November 2014
Closing date of the Offer	1 September 2015

• The Offer will close earlier if fully subscribed. The Boards reserve the right to close the Offer earlier and to accept Applications and issue Offer Shares at any time following the receipt of valid applications.
   
• The results of the Offer will be announced to the London Stock Exchange through a Regulatory Information Service provider authorised by the Financial Conduct Authority.
   
• Dealing is expected to commence in the Offer Shares within ten business days of allotments and share and tax certificates are expected to be dispatched within 14 business days of allotments.
   
• The dates set out in the expected timetable above may be adjusted by the Companies, in which event details of the new dates will be notified through a Regulatory Information Service.

Offer Statistics

Costs of Offer	Up to 7.5% of gross proceeds of Offer
Initial adviser charge or intermediary commission	Up to 4.5% of gross proceeds of Offer
Ongoing adviser charge or annual ongoing charge	Up to 0.5% per annum of the latest NAV of gross sums invested in the Offer for up to 9 years

• The cost of the Offer is capped at 7.5%. Octopus has agreed to indemnify the Companies against the costs of the Offer in excess of this amount.

Copies of the Prospectus and Circulars will shortly be available for inspection at the National Storage Mechanism, which is located at:

http://www.hemscott.com/nsm.do

and on the Company's website:

http://www.octopusinvestments.com

For further information please contact:

Patricia Standaloft
Company Secretary
0207 710 6471

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Octopus Titan VCT 2 PLC via Globenewswire

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