Merger Update

    RNS Number : 0038B
  Foresight 3 VCT PLC
  08 August 2008
   

    JOINT ANNOUNCEMENT

    ENTERPRISE VCT PLC
    FORESIGHT 3 VCT PLC

    8 August 2008


    RECOMMENDED PROPOSALS FOR A MERGER BETWEEN ENTERPRISE VCT PLC ("ENTERPRISE") AND FORESIGHT 3 VCT PLC ("FORESIGHT 3") TO BE COMPLETED BY
WAY OF A SCHEME OF RECONSTRUCION OF ENTERPRISE UNDER SECTION 110 OF THE INSOLVENCY ACT 1986 AND THE TRANSFER BY ENTERPRISE OF ITS ASSETS AND
LIABILITIES TO FORESIGHT 3 AND THE CANCELLATION OF LISTING OF THE ENTERPRISE SHARES

    SUMMARY

    The boards of Enterprise and Foresight 3 ("Boards") announce that they have reached agreement on recommended proposals for the merger of
Enterprise and Foresight 3 on a relative net asset basis The merger should result in the enlarged company having net assets of over £44.5
million and is expected to deliver the strategic benefits and cost savings as identified below. The boards further announce that they are
today writing to their respective shareholders with full details of the proposed merger.

    
The merger will be effected by Enterprise being placed into members' voluntary liquidation pursuant to a scheme of reconstruction under
Section 110 of the Insolvency Act 1986. The assets and liabilities of Enterprise will then be transferred to Foresight 3 in exchange for new
Foresight 3 C Shares ("Foresight 3 C Shares") (which will be issued directly to the shareholders of Enterprise). 

    The effective date for the transfer of the assets and liabilities of Enterprise and the issue of Foresight 3 C Shares pursuant to the
merger is expected to be 10 September 2008 ("the Effective Date"). Following the Effective Date, the listing of the Enterprise shares is
anticipated to be cancelled on 11 September 2008.

    The merger is conditional on the approval of resolutions to be proposed to shareholders of Enterprise and Foresight 3 at extraordinary
general meetings to be held on 2 September 2008 (for both Enterprise ("Enterprise EGM 1") and Foresight 3 ("Foresight 3 EGM")) and 10
September 2008 (for Enterprise only ("Enterprise EGM 2")) and dissent not having been expressed by shareholders of Enterprise holding more
than 10 per cent. in nominal value of the issued Enterprise share capital.

    Foresight 3 will also take this opportunity to enter into revised performance incentive arrangements with Foresight Group LLP
("Foresight Group") and amend its articles of association ("Foresight 3 Articles") to extend the life of Foresight 3, amend directors'
remuneration limits and authorise the Foresight 3 board to approve a director's conflict under the new provisions to come into force under
the Companies Act 2006. 

    INTRODUCTION

    In September 2004, the Merger Regulations were introduced allowing VCTs to be acquired or merge without prejudicing tax reliefs obtained
by their shareholders. Several VCTs have now taken advantage of these regulations to create larger VCTs where fixed running costs can be
spread over a greater asset base.

    The Boards announced on 3 March 2008 that they had been in discussions to merge the companies. As a precursor to such a merger, the
shareholders of Enterprise were asked to ratify the appointment of Foresight Group as its new investment manager. The shareholders of
Enterprise provided this ratification at the extraordinary general meeting held on 31 March 2008.

    The Boards are now in a position to put merger proposals to the shareholders of their relevant companies. The merger will initially see
the assets and liabilities of Enterprise transferred into a newly created Foresight 3 C ordinary shares fund ("Foresight 3 C Shares fund")
to be subsequently merged with the Foresight 3 ordinary shares fund ("Foresight 3 Ordinary Shares fund") ten business days following the
publication of the audited results for the year to 31 March 2009. This will allow shareholders to benefit from any distributions possible
from their existing portfolios and the investments in each fund to be reviewed during the coming year and audited as part of the year end
audit for the current financial year of Foresight 3 ending on 31 March 2009.

    The merger is expected to deliver strategic benefits through:

    *     a reduction in combined annual running costs for the enlarged company and a consequent reduction in the cost per share; 

    *     creation of a VCT of a more economically efficient size with a greater capital base over which to spread administration and
management costs; 

    *     participation in a larger VCT with prospects for a more diversified portfolio - this will disperse the portfolio risk across a
broader range of investments, technologies, markets and industry sectors; 

    *     increased potential to maintain a steady flow of distributions and a continuing buy-back programme at a limited discount due to
the increased size and the reduced need to retain funds to remain at an economically viable size;

    *     a larger pool of investment funds providing the opportunity for improved liquidity and flexibility to provide further support for
those investments offering the highest potential rewards; 

    *     greater potential for fundraising and a position to encourage a secondary market in the enlarged company's shares; and

    * increased flexibility in meeting the various requirements for qualifying VCT status.
    Although either company could have acquired the assets and liabilities of the other under such a scheme, Foresight 3 was selected as the
acquirer because of its greater size, greater return since Foresight Group's appointment as its investment manager and stronger liquidity.
The merger will be outside the provisions of the City Code on Takeovers and Mergers.

    EXPECTED TIMETABLES

    Expected Timetable for Enterprise

    Enterprise EGM 1                                                                              12.30 p.m. on 2 September 2008 
    Record date for Enterprise shareholders' 
    entitlements under the merger                                                          5.00 p.m. on 9 September 2008

    Calculation date                                                                                 after 5.00 p.m. on 9 September 2008
    Suspension of listing of the shares                                                   8.00 a.m. on 10 September 2008
    Enterprise EGM 2                                                                              2:30 p.m. on 10 September 2008 

    Effective Date for transfer of assets and 
    liabilities of Enterprise to Foresight 3 and the 
    issue of Foresight 3 C Shares                                                          10 September 2008

    Announcement of results of Enterprise EGM 2 and completion 
    of the merger (if applicable)                                                              10 September 2008

    Cancellation of listing of the Enterprise shares                                8.00 a.m. on 11 September 2008
    Admission of and dealings in Foresight 3 C Shares
    to commence                                                                                    12 September 2008 
    Expected Timetable for Foresight 3 

    Foresight 3 EGM                                                                               12.00 p.m. on 2 September 2008 

    Effective Date for transfer of assets and liabilities 
    of Enterprise to Foresight 3 and the issue of 
    Foresight 3 C Shares                                                                        10 September 2008

    Announcement of completion of the merger (if applicable)              10 September 2008

    Admission of and dealings in the Foresight 3 C Shares
    to commence                                                                                     12 September 2008

    Background to Enterprise and Foresight 3

    Foresight Group assumed the investment management contracts of Foresight 3 (formerly Advent VCT plc) from Advent Fund Managers Limited
in July 2004.  

    As at 30 June 2008, Foresight 3 had investments in 20 companies with an aggregate value of £14.5 million, as well as £10.5 million in
cash and net current assets. The unaudited net asset value per Foresight 3 Ordinary Share was 99.7 pence giving a total return (net asset
value plus aggregate amount of distributions) of 111.7 pence per Foresight 3 Ordinary Share since 30 September 2004. 

    Foresight Group took responsibility of the management of Enterprise's portfolio on 1 April 2008. As at 30 June 2008, Enterprise had
investments in 59 companies with an aggregate value of £17.0 million. The unaudited net asset value per share was 65.3 pence. 

    The merger of the two companies should result in cost savings and enhanced administrative efficiency. Because of a number of their
common features following the appointment of Foresight Group by Enterprise, this is achievable without major additional costs in terms of
rearranging the existing board constitution, or the investment and administrative arrangements of the two companies. 

    The Boards believe that overall risk should be reduced as the merged portfolio is spread across a larger number of investments and
industry sectors. The enlarged company will also be able to release available funds to support investment in new companies and further
investment in existing investee companies which require additional investment. 

    The anticipated cost for both companies of undertaking the merger is approximately £386,000 (including VAT) including legal and
professional fees, stamp duty and the costs of winding up Enterprise. The costs of the merger will be split equally between Foresight and
Enterprise. Following completion of the merger, annual cost savings for the enlarged company of at least £178,000 per annum, representing
0.4 per cent per annum of the expected net assets of the enlarged company, are expected to be achieved. In addition, Foresight Group will
contribute approximately £83,000 to the costs of the merger by waiving its entitlement to a proportion of its fees as detailed below. This
does not take into account the additional cost savings expected to be achieved once the Foresight 3 Ordinary Shares fund and the Foresight 3
C Shares fund are merged in 2009. On this basis, the Boards believe that the transaction costs would be recovered within two years. 

    The Merger

    The merger provides for Enterprise to be put into members' voluntary liquidation and for the assets and liabilities of Enterprise to be
transferred to Foresight 3 in consideration for new Foresight 3 C Shares of an equivalent value (based, inter alia, on the unaudited net
asset value of the Enterprise shares as at 30 June 2008, adjusted to take into account movements in portfolio valuations, material changes
in other net assets and the costs of implementing the Schemeup to 9 September 2008 ("Roll-Over Value")) which will be issued directly to the
shareholders of Enterprise. Following the transfer, Enterprise will be wound up and the shares in Enterprise cancelled. 

    Foresight 3 will agree, pursuant to the transfer agreement, to meet all liabilities of Enterprise including, but not limited to, the
costs of the merger but an amount estimated to cover such liability will be reflected as a liability in the calculation of the Roll-Over
Value of an Enterprise share. Following the transfer, Enterprise will be wound up and the shares cancelled. 

    The Scheme is conditional on, inter alia, the approval by Enterprise and Foresight 3 shareholders of the resolutions to be proposed at
their respective extraordinary general meetings (as applicable). 

    As at 30 June 2008, the unaudited net asset value of an Enterprise share was 65.3 pence and the Roll-Over Value, had Enterprise been
wound up on that date, would have been 64.6 pence per Enterprise share (assuming no dissenting Enterprise shareholders).  

    Foresight 3 C Shares fund

    The Foresight 3 C Shares fund will be managed as a separate fund to the Foresight 3 Ordinary Shares fund until the conversion of the
Foresight 3 C Shares into Foresight 3 Ordinary Shares ten business days following the publication of the audited results for the year to 31
March 2009 ("Conversion"). This will allow the investments in each fund to be reviewed and an audit of both funds to be completed following
the end of Foresight's current financial year on 31 March 2009.

    The segregation of the Foresight 3's assets into two funds will mean that, until Conversion, the Foresight 3 Ordinary Shares will be
exclusively entitled to receive the net returns flowing from the investments in the Foresight 3 Ordinary Shares fund (i.e. the existing
investments of Foresight 3 and any new investments from that fund,) and the Foresight 3 C Shares will be exclusively entitled to receive the
net returns flowing from the investments in the Foresight 3 C Shares fund (i.e. those transferred from Enterprise and any new investments
from that fund). In determining the net returns, each fund will bear its pro-rata proportion of the overheads of Foresight 3.

    Foresight Group LLP ("Foresight Group")

    Foresight Group has been the investment manager to Foresight 3 since July 2004 and will continue to provide investment management
services to the enlarged company following the merger. 

    Foresight Group currently receives an annual fee of 2.5 per cent of the net assets of Foresight 3 (ie the current Foresight 3 Ordinary
Shares fund). From the Effective Date, Foresight Group will also receive a fee of 2.5 per cent of the net assets of the Foresight 3 C Shares
fund by automatic extension of the annual fee over the additional net assets. 

    Foresight Group has, however, agreed to waive fees payable in respect of its appointment as the investment manager to Enterprise in full
for the period from 1 April 2008 to 30 November 2008 and 50 per cent of fees thereafter to 31 March 2009, and this agreement will be carried
forward after the merger and applied against the fees due to Foresight Group in respect of the Foresight 3 C Shares fund. The amount to be
waived is a contribution by Foresight Group to the costs of the proposed merger.

    Following Conversion, Foresight Group will receive an annual fee of 2.5 per cent of the net assets of the enlarged company. 

    The investment management agreement will be amended to extend the appointment of Foresight Group (and as a result, the appointment of
Foresight Fund Managers Limited (formerly VCF Fund Managers Limited)) to 31 March 2011 and thereafter on 12 months notice'. This extension
reflects Foresight Group's recent appointment as the investment manager to Enterprise and provides it with sufficient time to manage the
funds until and following Conversion.

    It is proposed to revise Foresight Group's entitlement to performance incentive fees, subject to the approval of the shareholders at the
Foresight 3 EGM and the merger becoming effective. Under the revised arrangements, Foresight Group will receive fees equal in value to 15%
of dividends in respect of Foresight 3, providing certain performance conditions are achieved.

    Board Changes.

    Following completion of the Scheme, it is intended that John Gregory (the chairman of Enterprise) and Tom Maxwell (a director of
Enterprise) will be appointed as additional directors of Foresight 3. 

    Cancellation of Listing 

    Enterprise will apply for cancellation of its listing upon the successful completion of the merger, which is anticipated to be on 11
September 2008. 

    Documents and Approvals

    Foresight 3 shareholders will receive a copy of a prospectus together with a circular convening the Foresight 3 EGM to be held on 2
September 2008 at which Foresight 3 shareholders will be invited to approve resolutions in connection with the merger and amendments to the
Foresight 3 Articles.

    Enterprise shareholders will also receive a circular in relation to the merger, together with the prospectus in respect of the Foresight
3 C Shares to be issued to Enterprise shareholders. The circular convenes Enterprise EGM 1 on 2 September 2008 and Enterprise EGM 2 on 10
September 2008 at which Enterprise shareholders will be invited to approve resolutions in connection with the merger.

    Copies of the prospectus and the circulars for Foresight 3 and Enterprise have been submitted to the UK Listing Authority and will be
shortly available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at:

    Financial Services Authority
    25 The North Colonnade
    Canary Wharf
    London E14 5HS
    Telephone: [phone]


    Enquiries

    Investment Manager for Enterprise and Foresight 3 
    Foresight Group LLP 
    Gary Fraser
    Telephone: [phone]

    Solicitors to Enterprise and Foresight 3    
    Martineau 
    Kavita Patel
    Telephone: [phone]

    Corporate Finance Adviser and Sponsor to Foresight 3    
    Landsbanki Securities (UK) Limited
    Jonathan Becher
    Telephone: [phone]

    Financial Adviser and Sponsor to Enterprise
    BDO Stoy Hayward LLP
    John Stephan or Susan Brice
    Telephone: [phone]

    The directors of Foresight 3 accept responsibility for the information relating to Foresight 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 Foresight 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 Enterprise accept responsibility for the information relating to Enterprise 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 Enterprise 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.

    Landsbanki Securities (UK) Limited, which is authorised and regulated by The Financial Services Authority, is acting exclusively for
Foresight 3 and for no one else in connection with the matters described herein and will not be responsible to anyone other than Foresight 3
for providing the protections afforded to customers of Landsbanki Securities (UK) Limited or for providing advice in relation to any matters
referred to herein.

    BDO Stoy Hayward LLP, which is authorised and regulated in the United Kingdom by The Financial Services Authority, is acting exclusively
for Enterprise and for no one else in connection with the matters described herein and will not be responsible to anyone other than
Enterprise for providing the protections afforded to customers of BDO Stoy Hayward LLP or for providing advice in relation to any matters
referred to herein.

    Martineau is acting exclusively for Enterprise and Foresight 3 and for no one else in connection with the matters described herein and
will not be responsible to anyone other than Enterprise and Foresight 3 for providing the protections afforded to clients of Martineau or
for providing advice in relation to the matters described herein.

This information is provided by RNS
The company news service from the London Stock Exchange
 
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