Octopus VCT 2 PLC Octopus Vct 2 Plc : Publication Of A Prospectus And Circulars In Respect Of Proposals To Merge With Octopus...

 
TIDMOVC2 
 
   Octopus Apollo VCT plc ("Apollo") 
 
   Octopus VCT 2 plc ("OVCT2") 
 
   (together the "Companies") 
 
   2 November 2015 
 
   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 (the 
"Scheme" or "Merger") under section 110 Insolvency Act 1986) and an 
offer for subscription by Apollo. 
 
   On 6 October 2015, the boards of Apollo and OVCT2 (the "Boards") 
announced that they had entered into discussions to merge the Companies 
into one company (the "Enlarged Company") and the Apollo Board announced 
that it also intended to raise further funds into Apollo pursuant to an 
offer for subscription (the "Offer") at the same time. 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 and a 
Prospectus relating to the Offer and Merger. Each of the Companies is 
managed by Octopus Investments Limited ("Octopus"). 
 
   The Merger will be completed by OVCT2 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. 
 
   OVCT2 shareholders will receive one D ordinary share of 1p in the 
capital of Apollo ("Scheme Shares" or "D Ordinary Shares") for every 
ordinary share of 1p held in OVCT2 and the benefits will be shared by 
each set of shareholders, with the costs being split proportionately 
based on the  net asset values of the Companies. The Merger requires the 
approval of resolutions by the Companies' shareholders. 
 
   Apollo is seeking to raise GBP30 million under an offer for subscription 
for new ordinary shares ("Offer Shares"), with an over allotment 
facility of a further GBP10 million. The Offer is subject to the 
approval of the Apollo shareholders. 
 
   Background 
 
   Since launch in 2006, Octopus Apollo VCT has been managed, with on the 
aim of providing shareholders with a stable, regular income. OVCT2 was 
launched in January 2011 with a similar investment mandate and is 
managed by the same Octopus team as Apollo.  Octopus was founded in 
March 2000. 
 
   The latest unaudited NAV of Apollo, as at 21 August 2015, was 83.4p per 
ordinary share and the latest unaudited NAV of OVCT2, as at 30 June 
2015, was 100.0p per ordinary share. The table below sets out the 
unaudited NAVs of the Companies and provides further detail on the 
venture capital investments in their portfolios. 
 
 
 
 
                         NAV per     Number of 
          Net Assets      share       venture 
          (unaudited)  (unaudited)    capital    Carrying value of the venture capital investments 
Company     (GBP'm)        (p)      investments                       (GBP'm)                       NAV plus cumulative dividends paid* (p) 
Apollo            105         83.4           30                                               91.5                                    113.4 
OVCT2              19        100.0           14                                               14.3                                    105.0 
 
 
   * the sum of (i) the unaudited NAV per share and (ii) all distributions 
per share paid since the first admission of the shares to the Official 
List 
 
   Each of the Companies has an investment objective and policy of 
providing shareholders with a stable, regular income and capital return 
by investing their funds in a broad spread of unquoted UK companies 
which meet the relevant criteria for 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. 
 
   With the above in mind, the Boards entered into discussions with Octopus 
to consider a merger of the Companies to create a single, larger VCT. 
The aim of the Boards is to improve shareholder value while also 
creating liquidity for those current investors of OVCT2 who wish to exit 
after their 5 year qualifying holding period has been reached.  The 
Boards also expect to achieve, among other things, strategic and scale 
benefits through the creation of an enlarged VCT. 
 
   The Scheme 
 
   The mechanism by which the Merger will be completed is as follows: 
 
 
   -- OVCT2 will be placed into members' voluntary liquidation pursuant to a 
      scheme of reconstruction under Section 110 IA 1986; 
 
   -- all of the assets and liabilities of OVCT2 will be transferred to Apollo 
      in consideration for the issue of Scheme Shares; and 
 
   -- the assets and liabilities of OVCT2 transferred to Apollo will constitute 
      a separate share fund. 
 
 
   The effect of the Scheme will be that OVCT2 shareholders will receive 
one Scheme Share in Apollo for each OVCT2 share held. 
 
   The Scheme is conditional upon its approval by the Apollo shareholders 
and by the OVCT2 shareholders, as well as the other conditions set out 
in the Prospectus and Circulars. 
 
   As the Companies have a similar 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. 
 
   The aggregate anticipated cost of undertaking the Merger is 
approximately GBP290,000, including VAT, legal and professional fees, 
stamp duty and the costs of winding up OVCT2. The costs of the Merger 
will be split proportionately between the Companies by reference to 
their respective NAVs immediately prior to the Merger. 
 
   Shareholders and investors should note that the merger by way of the 
Scheme will be outside the provisions of the City Code on Takeovers and 
Mergers. 
 
   The portfolio of assets which will be transferred from OVCT2 to Apollo 
as part of the Scheme is all considered to be in keeping with Apollo's 
investment policy. The extent of the liabilities (if any) which will be 
transferred from OVCT2 to Apollo as part of the Scheme will be those 
which are incurred in the ordinary course of business and merger costs 
which remain unpaid at the time of transfer. Any such liabilities are 
expected to be nominal in comparison to the value of the assets. 
 
   OVCT2 shareholders who do not vote in favour of the resolution to be 
proposed at OVCT2's first general meeting, as referred to in the 
timetable below, are entitled to dissent and have their shareholding 
purchased by the liquidators of OVCT2 (the "Liquidators") at a price 
agreed between the dissenting OVCT2 shareholders and the Liquidators (or 
by arbitration), which would be expected to be at a significant 
reduction to the net asset value of an OVCT2 share. If the conditions of 
the Scheme are not satisfied, the Companies will continue in their 
current form and the Boards will continue to review all options 
available to them regarding the future of the Companies. 
 
   Clearance has been requested from HMRC that the Scheme meets the 
requirements of the Merger Regulations and, therefore, that the 
implementation of the Scheme should not affect the status of Apollo as a 
VCT. It is the intention of the Apollo Board to continue to comply with 
the requirements of Income Tax Act 2007 following the Merger so that 
Apollo continues to qualify as a VCT. 
 
   Exit opportunity for OVCT2 Shareholders 
 
   After 30 June 2016, once the VCT qualifying period for the current OVCT2 
shareholders has been achieved, an opportunity will be provided for the 
holders of D Ordinary Shares to exit their investment in Apollo or, 
should they wish to continue their investment, to have their D Ordinary 
Shares converted into Ordinary Shares on a relative NAV basis in 
accordance with Apollo's articles of association. 
 
   EXPECTED TIMETABLE, OFFER STATISTICS AND COSTS 
 
   Expected Timetable for the Scheme 
 
   Apollo 
 
 
 
 
Latest time and date for receipt of Forms of Proxy        11 am on 26 November 
 for the General Meeting                                                  2015 
General Meeting                                           11 am on 30 November 
                                                                          2015 
Scheme Calculation Date                                    after 5.00 pm on 26 
                                                                  January 2016 
Scheme Effective Date for the transfer of the assets           27 January 2016 
 and liabilities of OVCT2 to the Company and the issue 
 of Scheme Shares 
Announcement of the results of the Scheme                      27 January 2016 
Admission of, and dealings in, Scheme Shares issued            28 January 2016 
 to commence 
CREST accounts credited (if applicable)                        28 January 2016 
Certificates for Scheme Shares despatched to OVCT2          Week commencing 15 
 Shareholders                                                    February 2016 
 
 
   OVCT2 
 
 
 
 
Latest time for receipt of forms of proxy for the      3.00 pm on 14 January 2016 
 OVCT2 First General Meeting 
OVCT2 First General Meeting                            3.00 pm on 18 January 2016 

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