Downing Inc VCT3 Downing Income Vct 3 Plc : Proposed Merger

 
TIDMDI3O 
 
 
   JOINT ANNOUNCEMENT 
 
   7 OCTOBER 2013 
 
   DOWNING DISTRIBUTION VCT 1 PLC ("DD1") 
 
   DOWNING INCOME VCT PLC ("DIV") 
 
   DOWNING INCOME VCT 3 PLC ("DIV3") 
 
   DOWNING INCOME VCT 4 PLC ("DIV4") 
 
   DOWNING ABSOLUTE INCOME VCT 1 PLC ("DAI1") 
 
   DOWNING ABSOLUTE INCOME VCT 2 PLC ("DAI2") 
 
   (TOGETHER, THE "COMPANIES" AND DIV, DIV3, DIV4, DAI1 AND DAI2 TOGETHER 
THE "EVERGREEN VCTS" AND EACH AN "EVERGREEN VCT") 
 
   RECOMMENDED PROPOSALS TO MERGE THE COMPANIES PURSUANT TO SCHEMES OF 
RECONSTRUCTION UNDER SECTION 110 OF THE INSOLVENCY ACT 1986 
 
   The boards of the Companies (the "Boards") are pleased to announce that 
they have agreed terms to merge the six Companies and that they are 
today writing to set out the merger proposals to their respective 
shareholders for consideration. Each of the Companies is managed by 
Downing LLP ("Downing"). 
 
   The merger ("Merger") will be effected by the Evergreen VCTs each being 
placed into members' voluntary liquidation pursuant to schemes 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 is subject to the approval of DD1's shareholder at a general 
meeting, convened for 31 October 2013. 
 
   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 the merger net asset values. Downing will bear 
50% of the costs of the Merger in the cases of DIV3, DAI1 and DAI2 and 
100% of the costs in the cases of DIV and DIV4. Each Scheme requires the 
approval of resolutions by the DD1 shareholders and the relevant 
Evergreen VCT's shareholders. Each Scheme is conditional on at least 
three of the five Schemes going ahead. 
 
   The Merger will, if effected, result in an enlarged DD1 ("Enlarged 
Company") with net assets of over GBP70 million. Based on the estimated 
net costs of the Merger of GBP225,000, after Downing's contribution of 
approximately GBP350,000, and the expected annual costs savings for the 
Enlarged Company (expected to be approximately GBP440,000), the Boards 
believe that the costs of the Merger would be recovered within 6 to 7 
months. 
 
   On completion of the Merger, DD1 will be renamed "Downing ONE VCT plc". 
 
   Immediately following the completion of the Merger, DD1 intends to 
consolidate its share capital to ensure, as near as possible, its net 
asset value per ordinary share is 100p (the "Consolidation"). This will 
be achieved by the rateable redesignation of a proportion of DD1's 
ordinary shares as worthless deferred shares and their off-market 
purchase and subsequent cancellation by DD1. Authority for the 
Consolidation is being sought from the shareholders of DD1. 
 
   Following the completion of the Merger and the Consolidation, DD1 
intends to make an offer to existing shareholders and members of the 
public of 20 million ordinary shares (with an option to extend up to 30 
million at the discretion of the directors) (the "Offer") and 
shareholders' authority to allot such additional shares is being sought. 
 
   In addition, DD1 intends to take the opportunity to renew allotment, 
disapplication of pre-emption rights and share purchase authorities, 
approve amendments to its articles of association and approve the 
cancellation of share premium account. 
 
   Further, DD1 is seeking the approval of its shareholders to enter into 
related party transactions with Downing in connection with revised 
investment management arrangements and promoter's fees in connection 
with the Offer. 
 
   Further details of the proposals are set out below. The approval of 
resolutions in connection with these proposals will be proposed at 
general meetings of the Companies ("Meetings") being convened as set out 
in the expected timetable below. 
 
   BACKGROUND 
 
   Set out below is a summary of historical information of the Companies, 
together with the latest published NAVs (taken from the unaudited 
management accounts to 31 August 2013, adjusted for dividends paid since 
31 August 2013) and the respective carrying value of the investments 
held be each company. 
 
 
 
 
           Date of 
           Company 
           listing/ 
          admission   Unaudited 
              to      net assets  Unaudited NAV per share  Carrying value of the venture capital investments 
Company    trading      (GBP)               (p)                                (GBP'000) 
DD1       3 May 1996  13,419,495                     68.5                                             13,240 
            21 Dec 
DIV          2005      9,082,804                     33.1                                              8,379 
DIV3 O    4 Apr 1996  11,026,586                     89.0                                             10,833 
DIV3 E    4 Apr 1996   4,922,933                     85.6                                              4,069 
DIV4      2 Dec 2004   7,116,834                     35.0                                              6,554 
            19 May 
DAI1 O       1997      6,989,482                     85.7                                              5,942 
            19 May 
DAI1 C       1997      6,526,530                     70.3                                              5,910 
DAI2 O    5 Feb 2010  13,573,835                     68.4                                             13,725 
DAI2 A    5 Feb 2010      29,846                      0.1                                                  - 
 
 
 
   The objectives of each of the Companies are broadly similar, each to 
invest in a diversified portfolio of UK smaller companies in order to 
generate income and capital growth over the long-term. The Companies 
also have similar investment policies and the Enlarged Company will 
adopt a harmonised investment policy, summarised below: 
 
 
 
 
VCT                                                                      In excess 
Qualifying                                                               of 70% 
Investments 
Income       Generally unquoted investments where the business           50% to 75% 
producing     owns substantial assets                                    of 
investments                                                              qualifying 
                                                                         investments 
Growth       Mostly AIM but may include some unquoted                    25% to 50% 
investments                                                              of 
                                                                         qualifying 
                                                                         investments 
Non-VCT      Secured property loans, non-qualifying quoted investments,  Up to 30% 
qualifying    fixed income securities 
investments 
 
 
 
   DD1 shareholders' authority for the implementation of this refined 
investment policy is being sought at the Meetings. 
 
   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 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 for economic and 
administration efficiencies, as well as to improve portfolio 
diversification. 
 
   With the above in mind, the Boards entered into discussions to merge the 
Companies to create a single, larger VCT. The aim is to achieve 
long-term strategic benefits and reductions in the annual running costs 
for all shareholders. 
 
   THE SCHEMES 
 
   The mechanism by which the Merger will be completed is as follows: 
 
   * each Evergreen VCT will be placed into members' voluntary liquidation 
pursuant to a scheme of reconstruction under Section 110 of IA 1986; and 
 
   *  all of the assets and liabilities of each Evergreen VCT will be 
transferred to DD1 in consideration for the issue of new shares of 1p 
each in the capital of DD1 ("Consideration Shares") (which will be 
issued directly to the shareholders of the relevant Evergreen VCT). 
 
   In respect of each Scheme, the Consideration Shares to be issued will be 
calculated on a relative net asset value basis. The relative net asset 
values will be the unaudited net asset values of the Companies as at the 
Calculation Date (this being 8 November 2013), adjusted to take into 
consideration each company's allocation of the estimated Merger costs. 
 
   Each Scheme is conditional upon certain conditions being satisfied as 
further set out in the circulars being posted to shareholders today, 
including resolutions to be proposed to shareholders of each of the 
Companies. Each Evergreen VCT will apply to the UKLA for cancellation of 
the listing of its shares, upon the successful completion of its Scheme, 
such cancellation is anticipated to take place on 11 December 2013 (the 
cancellation requiring the approval of the relevant Evergreen VCT's 
shareholders). 
 
   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 have similar investment policies, a number of common 
investments and are managed by Downing, this is achievable without 
material disruption to the Companies and their combined portfolio of 
investments. 
 
   The boards of the Companies consider that the Merger will bring a number 
of benefits to all of the Companies' groups of shareholders through: 
 
   * A reduction in the expected annual running costs for most 
shareholders; 
 
   * Annual running costs capped by Downing at 2.75% of net assets; 
 
   * An increased likelihood of a regular sustainable tax-free dividend 
yield of at least 4% of net assets per annum; 
 
   * Dispersion of risk across a broader range of investments pursuant to a 
new investment policy for the Company; 
 
   * Increased liquidity in the ability of shareholders to sell their 
shares, including an intention to buy in shares at a discount of 
approximately 5% to net asset value; and 
 
   * A potential reduction in the cost of, and enhanced prospects for 
raising, additional capital with which to support the existing 
portfolios and to make additional investments. 
 
   Additional attractive features of the Merger include: 
 
   * Simplification of management fee structure (with no performance 
incentive scheme); 
 
   * Significant contribution to the costs of the Merger by Downing such 
that net costs to Shareholders are expected to be recovered within 6 to 
7 months; and 
 
   * No impact on the tax position of the Companies' shareholders - 
existing VCT tax reliefs carry over and attach to the post Merger 
investment by all of the Companies' shareholders. 
 
   If three or four of the Schemes become unconditional, then the resulting 
Enlarged Company will be commensurately smaller than if all five Schemes 
become unconditional with the result that the Enlarged Company will have 
a less diverse portfolio, a smaller fund available for investment and a 
smaller net asset base across which to spread the costs of the Schemes 
that do go ahead and the running costs of the Enlarged Company going 
forward. In this case, the costs of the Schemes that do go ahead may 
take longer to recover than they would if the full, six-way Merger was 
implemented and Shareholders in the Enlarged Company will benefit from a 
less diverse portfolio of investments and a smaller initial pot of 
capital available to DD1 to make further investments. 
 
   The aggregate anticipated cost of undertaking the Merger is 
approximately GBP575,000 including VAT, legal and professional fees, 
stamp duty and the costs of winding up the Evergreen VCTs. The costs of 
the Merger will be split proportionately between the Companies by 
reference to their respective merger net assets (ignoring Merger costs). 
Each of the Companies will be responsible for its allocation of the 
estimated Merger costs whether or not a particular Scheme is approved 
and becomes effective. 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. DD1 was selected as the acquirer 
because (i) it has accumulated losses available to set off against 
future profits realising a significantly reduced corporation tax bill 
for the Enlarged Company and (ii) as one of the larger of the six 
Companies it is a relatively tax efficient vehicle to act as acquirer in 
terms of stamp duty. 
 
   On the assumption that the net assets of the Enlarged Company will 
remain the same as the aggregated sum of the net assets of the Companies 
immediately after the Merger, the reduction in the annual running costs 
(ignoring annual management fees, performance incentive fees and 
exceptional items) for the Enlarged Company is estimated to be 
approximately GBP440,000 per annum, in particular, through the reduction 
in directors' and advisers' fees, audit fees, secretarial fees, printing 
costs and listing fees, as well as other fixed costs. This reduction 
would represent approximately 0.6% per annum of the expected net assets 
of the Enlarged Company. On this basis, and assuming that no new funds 
were to be raised or investments realised to meet annual costs, the 
Board and the Evergreen VCTs' Boards believe that the costs of the 
Merger would be recovered within 6 to 7 months. 
 
   As an illustration, had the Merger been completed on 31 August 2013, the 
number of "Consolidated Consideration Shares" (being those Consideration 
Shares remaining in issue following the Consolidation) that would have 
been issued for each existing Evergreen VCT share held are as follows: 
 
   * DD1: 0.682 Consolidated Consideration Shares for every ordinary share 
held in DD1 
 
   * DIV: 0.326 Consolidated Consideration Shares for every ordinary share 
held in DIV 
 
   * DIV3O: 0.887 Consolidated Consideration Shares for every ordinary 
share held in DIV3 
 
   * DIV3E: 0.853 Consolidated Consideration Shares for every E share held 
in DIV3 
 
   * DIV4: 0.344 Consolidated Consideration Shares for every ordinary share 
held in DIV4 
 
   * DAI1O: 0.854 Consolidated Consideration Shares for every ordinary 
share held in DAI1 
 
   * DAI1C: 0.700 Consolidated Consideration Shares for every C share held 
in DAI1 
 
   * DAI2O: 0.681 Consolidated Consideration Shares for every ordinary 
share held in DAI2 
 
   * DAI2A: 0.001 Consolidated Consideration Shares for every A share held 
in DAI2 
 
   The illustrations have are based on the unaudited NAV of each of the 
Companies as at 31 August 2013, adjusted for estimated Merger Costs and 
dividends paid and to be paid since 31 August 2013. 
 
   THE OFFER 
 
   The directors of DD1 have decided to take the opportunity to raise up to 
GBP20 million through the Offer. The board of DD1 may, in their absolute 
discretion, decide to increase the Offer to raise up to a further GBP10 
million if there proves to be excess demand from investors, subject to a 
maximum of 30 million new ordinary shares in DD1 being offered pursuant 
to the Offer (the "Offer Shares"). This will provide DD1 shareholders 
and new investors with the opportunity to invest in DD1 and benefit from 
the tax reliefs available to qualifying investors in VCTs. 
 
   The Offer Shares issued under the Offer will issued at an offer price as 
determined by the application of a formula taking into account an 
individual investor's bespoke issue costs and agreed adviser charges. 
 
   Downing will act as promoter to the Offer and be paid a commission of 
either (i) 3.5% of the initial net asset value of the Offer Shares 
allotted to Investors who subscribe through authorised intermediaries; 
or (ii) 5.5% of the initial net asset value of Offer Shares allotted to 
Investors who subscribe directly. 
 
   The Offer is conditional on the approval of resolutions by DD1 
Shareholders. 
 
   MANAGEMENT AND ADMINISTRATION ARRANGEMENTS 
 
   Downing is the investment manager of all of the Companies and also 
provides administration and secretarial services to all of the 
Companies. 
 
   Subject to the completion of the Merger, the Enlarged Company will enter 
into revised arrangements with Downing pursuant to which Downing will 
receive an annual investment management/advisory fee of an amount equal 
to 1.8% of the net assets of the Enlarged Company and an annual 
administration fee based on a formula of (i) a basic fee of GBP40,000 
(plus RPI adjustment); (ii) a fee of 0.125% per annum on funds in excess 
of GBP10 million; and (iii) GBP10,000 per additional share pool. 
 
   Downing have agreed to provide a running costs cap to the Enlarged 
Company of 2.75% of net assets per annum. 
 
   It is proposed that Downing will continue to act as the discretionary 
investment manager to DD1 immediately following the Merger until such 
time as the DD1 registers with the FCA as its own alternative investment 
fund manager pursuant to the Alternative Investment Fund Managers 
Directive (2001/61/EU). At that point, Downing will switch to an 
investment advisory role, albeit on the same commercial terms. 
 
   THE DD1 BOARD 
 
   The Boards have considered what the size and future composition of the 
DD1 board should be following the Merger and it has been agreed that 
subject to completion of the Merger, the Board composition will be 
rearranged such that four new directors will be appointed and three of 
the existing directors of the DD1 will resign. 
 
   Christopher Powell shall step down as chairman of DD1 to be replaced by 
Chris Kay who, as a current director of DIV, DIV4 and DAI1, will bring 
knowledge and experience of those VCTs to his new role. Stuart Goldsmith 
will continue as a director of DD1 and Helen Sinclair (currently a 
director of DIV4), Barry Dean (currently a director of DAI2) and Andrew 
Griffiths (currently a director of DIV3) will be appointed to the DD1 
board. 
 
   DD1 CHANGES TO ITS ARTICLES, RENEWAL OF SHARE ISSUE AND BUYBACK 
AUTHORITIES AND CANCELLATION OF SHARE PREMIUM ACCOUNT 
 
   In addition to the resolutions approving the Merger and the revised 
investment policy, to be proposed at the general meeting of DD1 convened 
for 31 October 2013, a number of other resolutions are to be considered 
by the DD1 shareholders. 
 
   DD1 intends 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 DD1 
following the Merger. 
 
   DD1 also proposes to seek the approval of its shareholders to cancel its 
share premium account, subject to the sanction of the Court. 
 
   In addition, DD1 proposes to seek the approval of its shareholders to 
amend its articles of association to (i) limit its borrowings to 10% of 
the aggregate amount paid up on its issued share capital and the amounts 
standing to the credit of the DD1's consolidated reserves (ii) increase 
the aggregate maximum remuneration of directors from GBP75,000 to 
GBP150,000 (iii) amend the definition of "Subsidiary" in its articles 
(the intention being to ensure that such definition falls within 
s1159(1) of the Companies Act in particular circumstances) and (iv) the 
addition of a new article requiring the directors to comply with the 
Alternative Investment Fund Managers Directive (2001/61/EU) for such 
time as DD1 is registered thereunder as its own investment manager. 
 
   THE EVERGREEN VCTS' GENERAL MEETINGS 
 
   Each of the Schemes is also subject to the approval of the shareholders 
of the relevant Evergreen VCT at first general meetings to be held 
between 30 October and 1 November 2013, and subsequent second general 
meetings to be held on 12 November 2013 (with the purpose of approving 
each of the Evergreen VCTs being put into liquidation pursuant to the 
Merger). 
 
   The Evergreen VCTs' shareholders are also each being asked to approve a 
resolution to amend the articles of association of the relevant 
Evergreen VCT in order to allow each Evergreen VCT to act as its 
shareholders' receiving agent for the purpose of the valuation report, 
to be prepared by an independent valuer pursuant to section 593 of the 
Companies Act 2006, which will confirm to DD1 that the value of the 
relevant Evergreen VCT's assets and liabilities which are being 
transferred to DD1 as part of the Merger is not less than the aggregate 
amount treated as being paid up on the Consideration Shares being issued 
to the relevant Evergreen VCT's shareholders pursuant to that Scheme. 
 
   RELATED PARTY TRANSACTIONS 
 
   In connection with the Offer, DD1 intends to enter into the 
administration fee and promotion fee arrangements with Downing (as 
detailed above). DD1 also intends to enter into the revised investment 
management / investment advisory arrangements with Downing (also as 
detailed above). 
 
   Key features of the Investment Services Agreement 
 
   Subject to the Mergers becoming effective, the DD1 will enter into the 
Investment Services Agreement with Downing LLP. The key features will be 
as follows: 
 
 
   -- Initially a discretionary investment management arrangement (subject to 
      the investment policy and directions issued by the Board); 
 
   -- Converting to a non-discretionary advisory arrangement (all major new 
      investment decisions will be formally approved by the Board) upon the 
      registration of DD1 as its own alternative investment fund manager under 
      the AIFMD; 
 
   -- Annual investment management/advisory services fee of 1.8% of net 
      assets; 
 
   -- Administration fee based on a formula of (i) a basic fee of GBP40,000 
      (plus RPI); (ii) a fee of 0.125% per annum on funds in excess of GBP10 
      million; (iii) GBP10,000 per additional share pool; 
 
   -- No performance incentive scheme; and 
 
   -- 12 months' notice by either side. 
 
 
   Entering into this agreement represents a related party transaction 
under Chapter 11 of the Listing Rules, as Downing LLP are a related 
party by virtue of being the current investment manager. 
 
   Additionally, as referred to above, DD1 proposes, conditional upon 
completion of the Mergers, to launch a fundraising to issue up to GBP20 
million of New Shares. It is proposed that Downing will act as Promoter 
of the Offer. Under the proposed Promoter Agreement with DD1, Downing 
would act as agent of DD1 to use its reasonable endeavours to procure 
subscribers under the Offers for up to 20 million new Ordinary Shares 
for DD1 (with an option to extend the Offer by an additional 10 million 
shares at the Board's discretion). Downing will be paid a fee for acting 
in this role which, if all subscribers apply directly (without a 
financial adviser) could amount to 5.5% of the total funds raised in the 
Offer (which could be up to GBP20 million). Downing will pay all Offer 
related costs out of their fee. This level of the fee, and the terms 
attached thereto are fairly standard in the venture capital trust 
market. This transaction represents a related party transaction under 
the Listing Rules, and this agreement requires Shareholders' approval in 
general meeting of Resolution 8 to proceed. 
 
   The Board, which has been so advised by Spark Advisory Partners Limited, 
considers the above related Party Transactions to be fair and reasonable 
so far as Shareholders are concerned. In providing its advice, Spark 
Advisory Partners Limited has taken into account the Board's commercial 
assessment of the Related Party Transaction. 
 
   Downing is regarded as a related party pursuant to the Listing Rules of 
the UK Listing Authority by virtue of it being the investment manager of 
DD1. Shareholder approval is, therefore, required under the Listing 
Rules of the UK Listing Authority to enter into these transactions. 
 
 
 
 
EXPECTED TIMETABLE FOR THE MERGER                                                                                   2013 
Latest time for the receipt of forms of proxy for                                                2.00 p.m. on 29 October 
 the DD1 General Meeting 
DD1 General Meeting                                                                              2.00 p.m. on 31 October 
Calculation Date                                                                                              8 November 
Effective Date for the transfer of the assets and                                                            12 November 
 liabilities of the Evergreen VCTs to DD1 and the issue 
 of Consideration Shares 
Announcement of the results of the DD1 General Meeting                                                       12 November 
 and completion of the Schemes 
Consolidation of DD1 Ordinary Share capital by the                                                           12 November 
 creation and off market purchase of Deferred Shares 
 
Admission and dealings in the Consideration Shares                                                           15 November 
 to commence 
CREST accounts credited with the Consolidated Consideration                                                  15 November 
 Shares issued pursuant to the Schemes following the 
 Consolidation 
Certificates for post-Consolidation Shares dispatched                                                        26 November 
 by 
 
Consideration Shares replaced by Consolidated Consideration                                                  16 November 
 Shares 
Certificates for the Consolidation Consideration Shares                                                      26 November 
 despatched by 
NEW DD1 SHARE OFFER 
Opening of the new Offer for subscription                                                                    30 November 
First Closing Date                                                                                          4 April 2014 
Offer closes*                                                                                      Noon on 30 April 2014 
Allotments                                                                                                       monthly 
Effective date for the listing of the Offer Shares              Three business days following allotment and commencement 
                                                                                                             of dealings 
Share and tax certificates dispatched                                              Within ten Business Days of allotment 
*The Offer will close earlier than the date stated 
 if it is fully subscribed. The Directors will reserve 
 the right to close the Offer earlier or to extend 
 the Offer to no later than 6 October 2014 and to accept 
 applications and issue Offer Shares pursuant to the 
 Offer at any time prior to or after the closing date. 
EXPECTED TIMETABLE FOR DOWNING INCOME VCT PLC ("DIV") 
                                                                                                                    2013 
Latest time for receipt of forms of proxy for the                                                2.30 p.m. on 28 October 
 DIV First General Meeting 
DIV First General Meeting                                                                           2.30 p.m. 30 October 
Date from which it is advised that dealings in DIV                                                            6 November 
 Shares should only be for cash settlement and immediate 
 delivery of documents of title 
Latest time for receipt of forms of proxy for the                                                2.20 p.m. on 8 November 
 DIV Second General Meeting 
Calculation Date                                                                                              8 November 
DIV register of members closed                                                                               11 November 
Record Date for DIV Shareholders' entitlements                                                               11 November 
Dealings in DIV Shares suspended                                                                7.30 a.m. on 12 November 
DIV Second General Meeting                                                                      2.20 p.m. on 12 November 
Effective Date for the transfer of the assets and                                                            12 November 
 liabilities of DIV to the DD1 and the issue of Consideration 
 Shares pursuant to the DIV Scheme 
Cancellation of the listing of the DIV Shares                                                   8.00 a.m. on 11 December 
EXPECTED TIMETABLE FOR DOWNING INCOME VCT 3 PLC ("DIV3") 
                                                                                                                    2013 
Latest time for receipt of forms of proxy for the                                                3.30 p.m. on 28 October 
 DIV3 First General Meeting 
DIV3 First General Meeting                                                                       3.30 p.m. on 30 October 
Date from which it is advised that dealings in DIV3                                                           6 November 
 Shares should only be for cash settlement and immediate 
 delivery of documents of title 
Latest time for receipt of forms of proxy for the                                                2.40 p.m. on 8 November 
 DIV3 Second General Meeting 
Calculation Date                                                                                              8 November 
DIV3 register of members closed                                                                              11 November 
Record Date for DIV3 Shareholders' entitlements                                                              11 November 
Dealings in DIV3 Shares suspended                                                               7.30 a.m. on 12 November 
DIV3 Second General Meeting                                                                     2.40 p.m. on 12 November 
Effective Date for the transfer of the assets and                                                            12 November 
 liabilities of DIV3 to the DD1 and the issue of Consideration 
 Shares pursuant to the DIV3 Scheme 
Cancellation of the listing of the DIV3 Shares                                                  8.00 a.m. on 11 December 
EXPECTED TIMETABLE FOR DOWNING INCOME VCT 4 PLC ("DIV4") 
                                                                                                                    2013 
Latest time for receipt of forms of proxy for the                                                3.00 p.m. on 28 October 
 DIV4 First General Meeting 
DIV4 First General Meeting                                                                       3.00 p.m. on 30 October 
Date from which it is advised that dealings in DIV4                                                           6 November 
 Shares should only be for cash settlement and immediate 
 delivery of documents of title 
Latest time for receipt of forms of proxy for the                                                2.00 p.m. on 8 November 
 DIV4 Second General Meeting 
Calculation Date                                                                                              8 November 
DIV4 register of members closed                                                                              11 November 
Record Date for DIV4 Shareholders' entitlements                                                              11 November 
Dealings in DIV4 Shares suspended                                                               7.30 a.m. on 12 November 
DIV4 Second General Meeting                                                                     2.00 p.m. on 12 November 
Effective Date for the transfer of the assets and                                                            12 November 
 liabilities of DIV4 to the DD1 and the issue of Consideration 
 Shares pursuant to the DIV4 Scheme 
Cancellation of the listing of the DIV4 Shares                                                  8.00 a.m. on 11 December 
EXPECTED TIMETABLE FOR DOWNING ABSOLUTE INCOME VCT 
 1 PLC ("DAI1") 
                                                                                                                    2013 
Latest time for receipt of forms of proxy for the                                                4.00 p.m. on 28 October 
 DAI1 First General Meeting 
DAI1 First General Meeting                                                                       4.00 p.m. on 30 October 
Date from which it is advised that dealings in DAI1                                                           6 November 
 Shares should only be for cash settlement and immediate 
 delivery of documents of title 
Latest time for receipt of forms of proxy for the                                                3.00 p.m. on 8 November 
 DIA1 Second General Meeting 
Calculation Date                                                                                              8 November 
DAI1 register of members closed                                                                              11 November 
Record Date for DAI1 Shareholders' entitlements                                                              11 November 
Dealings in DAI1 Shares suspended                                                               7.30 a.m. on 12 November 
DAI1 Second General Meeting                                                                     3.00 p.m. on 12 November 
Effective Date for the transfer of the assets and                                                            12 November 
 liabilities of DAI1 to the DD1 and the issue of Consideration 
 Shares pursuant to the DAI1 Scheme 
Cancellation of the listing of the DAI1 Shares                                                 8. 00 a.m. on 11 December 
EXPECTED TIMETABLE FOR DOWNING ABSOLUTE INCOME VCT 
 2 PLC ("DAI2") 
                                                                                                                    2013 
Latest time for receipt of forms of proxy for the                                               11.30 a.m. on 30 October 
 DAI2 First General Meeting 
DAI2 First General Meeting                                                                      11.30 a.m. on 1 November 
Date from which it is advised that dealings in DAI2                                                           6 November 
 Shares should only be for cash settlement and immediate 
 delivery of documents of title 
Calculation Date                                                                                              8 November 
Latest time for receipt of forms of proxy for the                                                3.20 p.m. on 8 November 
 DAI2 Second General Meeting 
DAI2 register of members closed                                                                              11 November 
Record Date for DAI2 Shareholders' entitlements                                                              11 November 
Dealings in DAI2 Shares suspended                                                               7.30 a.m. on 12 November 
DAI2 Second General Meeting                                                                     3.20 p.m. on 12 November 
Effective Date for the transfer of the assets and                                                            12 November 
 liabilities of DAI2 to the DD1 and the issue of Consideration 
 Shares pursuant to the DAI2 Scheme 
Cancellation of the listing of the DAI2 Shares                                                  8.00 a.m. on 11 December 
 
 
 
 
   DOCUMENTS AND APPROVALS 
 
   DD1 shareholders will receive a copy of a circular convening the DD1 
general meeting to be held on 31 October 2013 (together with a 
securities note relating to the Merger (the "Securities Note") at which 
DD1 shareholders will be invited to approve resolutions in connection 
with the proposals. 
 
   The Evergreen VCTs' shareholders will each receive a circular convening 
the Evergreen VCTs' first general meetings on 30 October 2012 (in the 
case of DIV, DIV3, DIV4 and DAI1) and 1 November 2013 (in the case of 
DAI2) and the Evergreen VCTs' second general meetings on 12 November 
2013 (together with the Securities Note) at which Evergreen VCTs' 
shareholders will be invited to approve resolutions in connection with 
their relevant Scheme. 
 
   Copies of the Prospectus (comprising the Securities Note together with a 
registration document and summary), the DD1 circular and the Evergreen 
VCTs' circulars have been submitted to the UK Listing Authority and will 
be shortly available for download both from the Downing website 
(www.downing.co.uk) and the national storage mechanism 
(www.morningstar.co.uk/uk/NSM). 
 
   For further information, please contact: 
 
   Investment Manager and Administrator for the Companies 
 
   Downing LLP - Grant Whitehouse - Telephone: [phone] 
 
   Solicitors to the Companies 
 
   RW Blears LLP - Frank Daly - Telephone: [phone] 
 
   Sponsor to DD1 
 
   Neil Baldwin - Spark Advisory Partners Limited - Telephone: [phone] 
3554 
 
   The directors and proposed directors of DD1 accept responsibility for 
the information relating to DD1 and 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 DD1 
and 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 DIV accept responsibility for the information relating 
to DIV 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 DIV 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. 
 
   The directors of DIV3 accept responsibility for the information relating 
to DIV3 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 DIV3 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. 
 
   The directors of DIV4 accept responsibility for the information relating 
to DIV4 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 DIV4 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. 
 
   The directors of DAI1 accept responsibility for the information relating 
to DAI1 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 DAI1 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. 
 
   The directors of DAI2 accept responsibility for the information relating 
to DAI2 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 DAI2 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. 
 
   RW Blears LLP are acting as legal advisers for 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 RW Blears LLP or for providing advice 
in relation to the matters described herein. 
 
   Spark Advisory Partners Limited, which is authorised and regulated in 
the United Kingdom by the Financial Conduct Authority, is acting as 
sponsor for DD1 and no one else and will not be responsible to any other 
person for providing the protections afforded to customers of Spark 
Advisory Partners Limited 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: Downing Income VCT 3 plc via Thomson Reuters ONE 
 
   HUG#1734181