Proven Growth & Income VCT plc : Proposed Merger

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PROVEN GROWTH AND INCOME VCT PLC

27 JUNE 2013

PARTICIPATION IN THE RECOMMENDED PROPOSALS FOR THE RECONSTRUCTION AND WINDING UP OF PROVEN HEALTH VCT PLC AND PROPOSED CHANGE OF INVESTMENT POLICY

Introduction

The Company is pleased to announce that it has reached agreement in principle with ProVen Health VCT plc ("ProVen Health" or "PHV") in respect of a merger of both companies to be effected by a scheme of reconstruction and winding up of ProVen Health.  ProVen Health is another venture capital trust managed by Beringea LLP.  Pursuant to the Proposals, the Company will acquire the undertaking and assets of PHV in consideration for the issue of New Ordinary Shares to PHV Shareholders. The Board also wishes to take the opportunity to put forward proposals for a change of the Company's investment policy to allow it to make non-qualifying investments in debt and debt-related securities of growth companies.  

The Company has today published a Circular and a Prospectus in respect of the Proposals with details of (a) the Company's proposed participation in the recommended scheme of reconstruction and winding up of PHV and the proposed related amendment to the Articles of Association; and (b) the proposed change to the Company's investment policy.  

The Proposals are subject to satisfaction of a number of conditions including the approval of Shareholders at a General Meeting to be held at 3.00 p.m. on 30 July 2013.  

The PHV Scheme

Background to and reasons for the PHV Scheme

As at 30 April 2013, PHV had net assets of approximately £7.6 million. The PHV Board believes that an increase in the size of PHV or a merger with another larger VCT would be in the best interests of its shareholders. The Company and PHV and have now reached agreement in respect of a recommended merger pursuant to the PHV Scheme.

The PHV Scheme

Under the PHV Scheme, PHV will be wound up voluntarily pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986. The PHV Scheme provides for the undertaking and assets of PHV to be transferred to the Company in consideration for the issue of New Ordinary Shares of an equivalent value to PHV Shareholders. The PHV Scheme is subject to, amongst other conditions, its approval by PHV Shareholders and approval by the Shareholders of the Company.

Benefits of the PHV Scheme to the Company

The Board believes that the main benefits of the PHV Scheme for Shareholders are as follows:

• the PHV Scheme provides an opportunity for the Company to increase its size and market capitalisation in a cost effective manner (as net assets valued at approximately £7.3 million will be acquired and the costs and expenses to be borne by the Company in connection with the Scheme are only expected to be approximately £100,000); 

• the Enlarged Company will have increased cash resources from which to create a more diversified portfolio thereby dispersing the portfolio risk across a broader range of investments and businesses; 

• Beringea, an investment manager with significant experience in investing in small and medium sized unquoted companies, will continue to manage the Company; 

• Beringea will make a contribution of £40,000 towards the costs and expenses of the Company's participation in the PHV Scheme which will be made by way of a partial management fee waiver over one year commencing on the Effective Date; and 

• the Company's fixed operating costs as a percentage of shareholder's funds will reduce. 

New Ordinary Shares to be issued to PHV Shareholders

If the PHV Scheme is implemented, the Company will acquire all of PHV's undertaking and assets, save to the extent required to meet its liabilities. The consideration for such acquisition shall be the issue of New Ordinary Shares to PHV Shareholders and the merger will be completed on a relative net asset basis. The assets to be transferred to the Company comprise investments in a portfolio of 13 unquoted companies primarily in the healthcare sector and at different stages of development. PHV also holds approximately £2.9 million in cash and liquidity funds. These assets therefore comply with the Company's existing investment policy (and its proposed new investment policy).

The number of New Ordinary Shares to be issued to PHV Shareholders under the PHV Scheme will be based on the adjusted Net Asset Value of an Ordinary Share (the "FAV per Ordinary Share") and the adjusted Net Asset Value of a PHV Share (the "FAV per PHV Share"). The FAV per Ordinary Share and the FAV per PHV Share will be calculated as at close of business on 2 August 2013 using each company's respective accounting policies (which are substantially similar). The investments held by the Company and PHV which are listed, quoted or traded on a recognised stock exchange will be valued by reference to the bid price on the principal stock exchange where the relevant investment is listed, quoted or dealt. Unquoted investments held by the Company and PHV will be valued at their fair value as at the Calculation Date as determined by the Directors and the PHV Directors respectively.

The FAV per Ordinary Share will be the net asset value of an Ordinary Share adjusted by making a deduction in respect of the Interim Dividend (as described below and which PHV Shareholders will not receive in respect of their New Ordinary Shares) and any costs and expenses of the Proposals to be met by the Company (save to the extent to be paid or met by Beringea). The FAV per PHV Share will be calculated in accordance with the PHV Scheme and will be the net asset value of a PHV Share after an adjustment in respect of any dividend to be paid by PHV prior to the Effective Date and the costs and expenses of the PHV Scheme to be met by PHV.

PHV Shareholders will be issued such number of New Ordinary Shares in the Company with a FAV per Ordinary Share equal to 100 per cent. of the FAV per PHV Share of their PHV Shares. The New Ordinary Shares issued pursuant to the PHV Scheme will rank equally in all respects with the existing issued Ordinary Shares (save that the New Ordinary Shares will not qualify for the Interim Dividend in respect of the period ended 28 February 2013 to be paid by the Company on 2 August 2013).

For illustrative purposes only, had the Calculation Date been 26 June 2013 (being the latest practicable date prior to publication of this document) and assuming that the NAV per Ordinary Share is 87.70 pence (being the latest published NAV per Ordinary Share), the NAV per PHV Share is 36.80 pence (being the latest published NAV per PHV Share) and all of the PHV Shareholders are eligible to receive New Ordinary Shares under the PHV Scheme, the FAV per Ordinary Share and FAV per PHV Share would have been 83.50 pence and 35.31 pence respectively and 8,714,535 New Ordinary Shares would have been issued to former PHV Shareholders under the PHV Scheme, representing approximately 14.3 per cent. of the issued Ordinary Share capital of the Enlarged Company.

The cash transferred to the Company by PHV under the PHV Scheme will be used and invested in accordance with the Company's existing investment policy (or the Company's proposed new investment policy, if adopted).

Announcement of the results of the PHV Scheme

The number of New Ordinary Shares to be issued pursuant to the PHV Scheme, the FAV per Ordinary Share and the FAV per PHV Share will all be announced through a Regulatory Information Service as soon as practicable following the Calculation Date.

Proposed Director

The Board and the PHV Board have considered what the size and future composition of the Board should be following the PHV Scheme becoming effective and have taken into account the amount of the respective net assets of both VCTs. The Board currently comprises four directors and it is intended that Frank Harding (a director of ProVen Health) will join the Board at the Effective Date. Frank Harding will be a non-executive director and is independent of the Investment Manager. The Proposed Director will be eligible to receive a fee of £22,500 per annum payable by the Company (and the Articles of Association will therefore require to be amended to increase the cap on the total fees and expenses payable to the directors and allow an additional Director to be appointed). None of the other PHV Directors will join the enlarged Board.

Mr Harding is chairman of KLM Cityhopper UK Limited and until February 2006 was chairman of Provalis plc (a listed health sector company). He is a chartered accountant with over 40 years' experience at KPMG, of which 29 years was as an audit/general practice partner, latterly specialising in advising UK companies with subsidiaries outside the UK and non-UK companies with subsidiaries in Europe. Mr Harding was president of the International Federation of Accountants from 1997 to 2000.

Charles Pinney (the Chairman of ProVen Health) will also be appointed as a consultant to the Board on the Effective Date to assist with the transition of ProVen Health's portfolio to the Company. 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.

Amendment to the Articles of Association

Under the Articles of Association, the fees to, and benefits in kind received by, the Directors for their services in the office of director shall not exceed in aggregate £100,000 per annum. This cap on fees has not been increased since the Company was established 12 years ago and it is proposed to increase this aggregate limit to £150,000 per annum (or such higher amount as the Company may from time to time by ordinary resolution determine) so as to give the Board the flexibility to increase the number of directors to five following the implementation of the Proposals.

Proposed change to the investment policy

The Company'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 Board believes that the performance of the Company 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. The Company 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, either directly or indirectly.

Costs and expenses of the Proposals

The aggregate costs and expenses to be incurred by the Company and PHV in connection with the PHV Scheme are expected to be approximately £240,000 (including VAT and stamp duty). The Company has agreed to meet the first £140,000 of those costs and expenses with £40,000 of this amount to be reimbursed to the Company 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 the £40,000 of costs and expenses paid by the Company have been recovered in full). Any costs and expenses incurred by the Company and PHV in connection with the Scheme in excess of £140,000 (including VAT) will be borne by PHV provided that the Company and PHV's total costs do not exceed £240,000 (including VAT).  Any costs and expenses incurred by the Company and PHV in excess of £240,000 (including VAT) will be met as to 50 per cent. by the Company and 50 per cent. by PHV.  If the PHV Scheme does not become effective, the Company will bear abort costs and expenses estimated at approximately £95,000 (including VAT).

General Meeting

A General Meeting has been convened at which Shareholders will be asked to consider and, if thought fit, approve resolutions required to implement the Proposals. The General Meeting, notice of which is set out at the end of the Circular, will be held at 3.00 p.m. on 30 July 2013 in The Forest Room at The Hospital Club, 24 Endell Street, Covent Garden, London WC2H 9HQ.

Interim Dividend

The Company has declared an interim dividend of four pence per Ordinary Share in respect of the period ended 28 February 2013. The Interim Dividend will be paid on 2 August 2013 to Shareholders on the Register on 5 July 2013. The ex-dividend date for the Interim Dividend is 3 July 2013. The New Ordinary Shares will not qualify for the Interim Dividend but will otherwise rank equally in all respects with the existing Ordinary Shares, including as to future dividends.

Admission and dealings

Applications will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the Official List (with a Premium Listing) and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the Main Market. It is expected that the New Ordinary Shares to be issued pursuant to the PHV Scheme will be allotted on or around 6 August 2013, credited as fully paid, and that the first day of dealings in such shares on the Main Market will be 7 August 2013.

Expected Timetable

All references are to UK time.	2013
Record date for the Interim Dividend	5 July
First general meeting of ProVen Health	10.00 a.m. 26 July
Latest time and date for receipt of forms of proxy for the General Meeting of ProVen Growth & Income	3.00 p.m. on 26 July
General Meeting of ProVen Growth & Income	3.00 p.m. on 30 July
Payment date for Interim Dividend	2 August
Calculation Date	close of business on 2 August
Second general meeting of ProVen Health	10.00 a.m. on 6 August
Effective Date for implementation of the PHV Scheme and the transfer of the undertaking and assets of ProVen Health to the Company and the issue of New Ordinary Shares to PHV Shareholders	6 August
Admission to listing and dealings commence in the New Ordinary Shares issued pursuant to the PHV Scheme	8.00 a.m. on 7 August

Notes:

1. The dates set out in the expected timetable above may be adjusted by the Company and/or ProVen Health (as the case may be) in which event details of the new dates will be notified to the UK Listing Authority and the London Stock Exchange and an announcement will be made through a Regulatory Information Service provider. 

2. All references to time are to London time. 

Definitions
The definitions set out below apply in this announcement unless the context requires otherwise:

Admission	admission of the New Ordinary Shares to the premium segment of the Official List and to trading on the Main Market, in each case in accordance with the Listing Rules and the Admission and Disclosure Standards
Admission and Disclosure Standards	the admission and disclosure standards of the London Stock Exchange for securities admitted, or seeking admission to be admitted to trading, as amended from time to time
Articles or Articles of Association	the articles of association of the Company (as amended from time to time)
Board	the board of Directors
Calculation Date	the time and date, which is expected to be close of business on 2 August 2013, at which the value of the Company's and PHV's assets and liabilities will be calculated for the purposes of the PHV Scheme
Circular	the circular published by the Company on 27 June 2013 containing details of the Proposals and the resolutions required to implement them
Company or ProVen Growth & Income	ProVen Growth and Income VCT plc, a company incorporated in England and Wales with registered number 04125326
Directors	the directors of the Company
Effective Date	the date (which is expected to be 6 August 2013) of the passing of the resolution to place PHV into members' voluntary liquidation at a general meeting of PHV convened for 6 August 2013 or, if later, on all conditions of such resolution being satisfied
Enlarged Company	the Company following implementation of the PHV Scheme
FAV per PHV Share	the formula asset value of a PHV Share calculated as at the Calculation Date in accordance with the PHV Scheme
FAV per Ordinary Share	the formula asset value of an Ordinary Share calculated as at the Calculation Date in accordance with the PHV Scheme
General Meeting	the general meeting of the Company convened for 3.00 p.m. on 30 July 2013 (or any adjournment thereof)
Interim Dividend	the interim dividend payable by the Company in respect of the year ended 28 February 2013 to be paid on 2 August 2013
Investment Manager or Beringea	Beringea LLP, the investment manager of the Company, a limited liability partnership registered in England and Wales with registered number OC342919
Issue	the issue of Ordinary Shares pursuant to the PHV Scheme
London Stock Exchange	London Stock Exchange plc
Main Market	the London Stock Exchange's main market for listed securities
NAV or Net Asset Value	in relation to a share, its net asset value on the relevant date calculated on the basis of the relevant company's normal accounting principles and policies
New Ordinary Shares	the new Ordinary Shares to be issued pursuant to the Issue
Official List	the official list of the UK Listing Authority
Ordinary Shares or Shares	ordinary shares of 1.6187p each in the capital of the Company

PHV or ProVen Health	ProVen Health VCT plc, a company incorporated in England and Wales with registered number 04131354
PHV Board or PHV Directors	the directors of PHV or any duly constituted committee thereof
PHV First General Meeting	the general meeting of PHV convened for 10.00 a.m. on 26 July 2013, or any adjournment thereof
PHV Liquidator	the liquidator of PHV to be appointed pursuant to a resolution to be passed by the PHV Shareholders at a general meeting to be held on 6 August 2013, or any adjournment thereof
PHV Scheme	the scheme of reconstruction and voluntary winding up of PHV under section 110 of the Insolvency Act 1986
PHV Second General Meeting	the general meeting of PHV convened for 10.00 a.m. on 6 August 2013, or any adjournment thereof
PHV Shareholders	holders of PHV Shares
PHV Shares	ordinary shares of 1p each in the capital of PHV

Premium Listing	a listing on the premium segment of the Official List
Proposals	the proposals for (i) the participation of the Company in the PHV Scheme (including the issue of New Ordinary Shares pursuant to the PHV Scheme and the amendment of the Articles of Association); and (ii) the proposed change of the Company's investment policy
Prospectus	the prospectus published by the Company on 27 June 2013
Register	the register of members of the Company
Regulatory Information Service	a regulatory information service that is on the list of regulatory information services maintained by the Financial Conduct Authority
Shareholders	holders of Ordinary Shares
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 competent authority for listing for the purposes of Part VI of the Financial Services and Markets Act 2000 (as amended)
VAT	value added tax

Enquiries:

For further information please contact:

Steven Tuckley

Beringea LLP

020 7845 7820

Notes

A copy of the Circular and Prospectus have been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.hemscott.com/nsm.do.

This announcement is for information purposes only and does not purport to be full or complete and any decision regarding the Proposals should be made only on the basis of the Circular and the Prospectus. 

This announcement does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase, any investment in any jurisdiction, nor shall it (or the fact of its distribution) form the basis of, or be relied on in connection with, any contract therefor. 

The issue and the distribution of this announcement, the Circular and/or the Prospectus in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to in this announcement, the Circular and/or the Prospectus comes should inform themselves about and observe any such restriction.  Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

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Source: Proven Growth & Income VCT plc via Thomson Reuters ONE

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