Northern Venture Trust Regulatory News (NVT)

2 Feb 2005 12:04

Northern Venture Trust PLC02 February 2005 Northern Venture Trust PLC (the "Company") Proposed amendment to the Articles, extension of the life of the Company, grantof authority to purchase Ordinary Shares and grant of authority to issueOrdinary Shares A copy of the above document has now been posted to shareholders. The full textof the Chairman's letter is set out below. Dear Shareholder Proposed amendment to the Articles, extension of the life of the Company, grantof authority to purchase Ordinary Shares and grant of authority to issueOrdinary Shares Introduction In my statement on pages 2 and 3 of Northern Venture Trust's annual report forthe year ended 30 September 2004, I reminded Shareholders that a vote on thecontinuation of the Company was due to take place in 2005. I indicated that yourBoard intended to recommend an extension of the Company's life for a furtherfive years, and that we were actively considering how best to satisfy theaspirations of Shareholders who now wished to realise part or all of theirinvestment as well as those of Shareholders who might wish to subscribe foradditional Shares in the Company with the benefit of the enhanced VCT taxreliefs introduced in the 2004 Budget. As a result of these deliberations your Board has today announced proposals to(i) amend the Articles, (ii) continue the Company's operations for a furtherfive years, (iii) authorise the Company to purchase Ordinary Shares through atender offer and (iv) authorise the Company to issue Ordinary Shares for cash bymeans of top-up offers to existing Shareholders and new investors. I am writingto explain the background to these proposals and to request Shareholders'support for the resolutions which will be proposed at an Extraordinary GeneralMeeting of the Company to be held on Thursday 24 February 2005. Proposed amendment to the Articles When the Company was launched in 1995, your Board considered that Shareholdersshould have the opportunity to review the future of the Company at appropriateintervals. Accordingly, the Articles contain a provision requiring the Directorsto convene an extraordinary general meeting immediately after the tenth annualgeneral meeting to vote on a special resolution that the Company be wound upvoluntarily. If this resolution is not passed by Shareholders, the Directors areobliged to propose such a resolution to Shareholders at every fifth anniversarythereafter. The Company's tenth annual general meeting is scheduled to take place inDecember 2005, and in the normal course of events an extraordinary generalmeeting to consider a winding-up resolution would have been convened immediatelythereafter. However the Directors believe that it would be inappropriate toproceed with the other proposals referred to in this Circular without firstseeking Shareholders' approval of the continuation of the Company for a furtherfive years, and accordingly a continuation resolution will be proposed at theExtraordinary General Meeting on 24 February 2005. As the resolution to extend of the life of the Company is being brought forward,the Articles need to be amended accordingly. The text of the revised Article 149is set out in Resolution 1 in the notice of the Extraordinary General Meeting.In line with the now well-established practice in the VCT sector, Shareholderswill be asked to vote on a resolution that the Company should continue as a VCTfor a further five years, and the resolution shall only be deemed to be notpassed if the vote is put to a poll and the votes against the resolution (a)constitute a majority against the resolution and (b) represent at least 25% ofthe total number of votes capable of being cast on the resolution. These changeswill not only avoid the potential confusion caused by the existing Article 149,which requires Shareholders to vote againsta winding-up resolution in order toapprove the Company's continuation, but also give some measure of protectionagainst the Company's life being ended by the continuation resolution beingdefeated by a small number of Shareholders on a low poll. If the continuationresolution is not passed then the Directors will, as at present, be required toput proposals to Shareholders for the voluntary liquidation, unitisation orother reorganisation of the Company. Proposed extension of the life of the Company Over the nine years to September 2004, the Company completed 93 venture capitalinvestments at a cost of £55.2 million and distributed a total of 44 pence pershare to investors by way of tax-free cash dividends. At 30 September 2004 theCompany had net assets of £35.3 million, equivalent to 89.6 pence per share, andits venture capital portfolio comprised 53 holdings with an aggregate value of£27.3 million. (Source: Company's annual report and audited accounts 2004.) Your Board considers that there is a strong case for the continuation of theCompany. Whilst past performance is no guarantee of future success, your Boardand the Manager believe that the venture capital portfolio has the potential forfurther growth and that market conditions should for the foreseeable futureremain conducive to the sourcing of suitable, high-quality new investmentpropositions for the Company. The portfolio contains a well-balanced range ofinvestments at various stages of maturity and the Company's strategy has been toachieve an orderly cycle of investments and realisations so as to optimise thereturns to Shareholders over a period of time. The Directors believe thatcontinuation will enable the future return on the Company's investments to bemaximised; by contrast, the forced liquidation of a portfolio of mainly unquotedinvestments would be unlikely to realise full value, and the return of cash toShareholders could be protracted. The Directors also consider it likely that many Shareholders will have takenadvantage of the capital gains deferral relief which was available on VCTsubscriptions until 5 April 2004 and would prefer not to crystallise theirdeferred gains as a result of the liquidation of the Company. Proposed tender offer to purchase Ordinary Shares Whilst recognising the arguments for continuation, the Directors acknowledgethat some Shareholders may now wish to have the opportunity to dispose of partor all of their investment in the Company. As is the case with many other VCTs,the Company's Ordinary Shares have often suffered from a lack of liquidity inthe market. In response to this the Company has at each annual general meetingsince 1997 sought renewal of its authority to purchase up to 10% of its issuedShares in the market for cancellation. During the year ended 30 September 2004the Company purchased 521,400 Shares, representing 1.3% of the total Shares inissue at the beginning of the year. In the event that Shareholders approve the continuation of the Company, yourBoard intends to provide an opportunity for Shareholders to dispose of OrdinaryShares at a narrow discount to the underlying net asset value, and withoutincurring dealing costs. Your Board therefore proposes that a tender offer bemade in the near future to purchase up to 10% of the current issued sharecapital of the Company, which would represent 3,965,490 Ordinary Shares, at aprice representing a discount of 5% to the latest published net asset value,subject to a minimum of 25p (the par value) per Ordinary Share. The tender offerwill give Shareholders the right to tender up to 10% of their Ordinary Shares ona pro rata basis and the opportunity to tender more than their pro rataentitlement subject to the take up of the offer by other Shareholders. The Directors estimate that on the basis of the 39,654,901 Ordinary Shares inissue at the date of this Circular and the audited net asset value per share of89.6p as at 30 September 2004, it would cost the Company approximately £3.4million to fulfil the tender offer in the event of full take-up by Shareholders.The Company has sufficient liquid resources to meet this commitment withoutrecourse to borrowing. Proposed further issue of Ordinary Shares The Board believes that some Shareholders may, if the life of the Company isextended, wish to subscribe for new Ordinary Shares in the Company, so providingthe Company with further funds for investment whilst taking advantage of theenhanced level of income tax relief at 40% available to investors in VCTs until5 April 2006. Accordingly, subject to Shareholders' approval of the proposedauthority to issue further Ordinary Shares, it is intended that your Companywill raise further cash for investment of up to approximately £8 million by wayof small top-up offers to Shareholders and members of the public, as well asthrough the Company's dividend reinvestment scheme. Applications from existingShareholders under the small top-up offers will be given priority over thosefrom the general public until 10 March 2005, following which all applicationswill be considered on a first come first served basis. Your Board is therefore seeking authority to issue up to 8,000,000 new OrdinaryShares for cash, representing approximately 20.2% of the current issued sharecapital of the Company at the date of this letter. This authority will expire atthe conclusion of the next annual general meeting or, if earlier, fifteen monthsfrom the date of the Extraordinary General Meeting. Any new Ordinary Shares so issued will rank pari passu in all respects with theexisting Ordinary Shares and will rank for all dividends which are both declaredand paid following Admission. Application will be made for Admission of any newOrdinary Shares issued under the authority and it is proposed that Admissionwill be effected at the earliest practicable opportunity for each tranche ofOrdinary Shares so issued. In each case, it is envisaged that definitive sharecertificates in respect of any Ordinary Shares issued under the proposed issueswill be despatched within 21 days of Admission. No temporary documents of titlewill be issued. Ordinary Shares so issued may be dematerialised at the option ofthe recipients and entered on the CREST system as the existing Ordinary Sharespresently are. Extraordinary General Meeting Pages 5 and 6 of this Circular contain a notice convening an ExtraordinaryGeneral Meeting of the Company to be held at 9.30am on Thursday 24 February 2005at the offices of SJ Berwin at 222 Gray's Inn Road, London WC1X 8XF where thefollowing resolutions will be proposed: 1. to amend the Articles to require the Directors to obtain Shareholders' approval every five years for the Company's continuation as a VCT, or to draw up proposals for the liquidation or reorganisation of the Company; 2. for the Company to continue as a VCT; 3. to authorise the Company to make a tender offer for the purchase of Ordinary Shares from Shareholders representing up to 10% of the issued share capital of the Company; 4. to authorise the Directors to allot all the outstanding, unissued Ordinary Shares of the Company; and 5. to authorise the Directors to allot up to 8,000,000 Ordinary Shares for cash as if Section 89(1) of the Companies Act 1985 did not apply. All the above resolutions except resolutions 2 and 4 will be proposed as specialresolutions. Action to be taken by shareholders It is important that you complete the Form of Proxy and return it to theCompany's registrars at The Causeway, Worthing BN99 6DA by no later than 9.30amon Tuesday 22 February 2005. Completion and return of the Form of Proxy will notpreclude you from attending the Extraordinary General Meeting and voting inperson should you so wish. Recommendation The Directors consider that the Proposals are in the best interests of theCompany and its Shareholders as a whole and they unanimously recommendShareholders to vote in favour of all the resolutions to be proposed at theExtraordinary General Meeting, as they intend to do in respect of their ownbeneficial holdings which, in aggregate, amount to 295,517 Ordinary Sharesrepresenting approximately 0.7% of the issued Ordinary Share capital of theCompany. Yours faithfully Professor Sir Frederick HollidayChairman In this letter, unless the context otherwise requires, the following expressionsbear the following meanings: "Act" the Companies Act 1985 as amended "Admission" admission of Ordinary Shares to the Official List of the UK Listing Authority and to trading on the London Stock Exchange's market for listed securities "Articles" the articles of association of the Company as amended from time to time "Circular" this document dated 1 February 2005, addressed to the Shareholders "Company" Northern Venture Trust PLC "CREST" the computerised settlement system to facilitate the transfer of title to securities in uncertified form operated by CRESTCo Limited "Directors" or "Board" the directors of the Company, whose names are set out on page 1 of this document "Extraordinary General Meeting" the extraordinary general meeting of the Company to be held at the offices of SJ Berwin at 222 Gray's Inn Road, London WC1X 8XF at 9.30am on 24 February 2005 "Form of Proxy" the form of proxy for use at the Extraordinary General Meeting "London Stock Exchange" London Stock Exchange plc "Manager" Northern Venture Managers Limited, which is authorised and regulated in the conduct of investment business by the Financial Services Authority "Ordinary Shares" ordinary shares of 25p each in the capital of the Company "Proposals" collectively the proposed amendment to the Articles, the extension of the life of the Company, the authority to make a tender offer to purchase Ordinary Shares and the authority to issue further Ordinary Shares for cash and disapplying pre-emption rights for such issues "Shareholders" holders of Ordinary Shares "UK Listing Authority" the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 "VCT" a venture capital trust as defined in section 842AA of the Income and Corporation Taxes Act 1988 (as amended) This information is provided by RNS The company news service from the London Stock Exchange