CR4 Core Vct Iv

 
TIDMCR4 
 
CORE VCT PLC 
CORE VCT IV PLC 
CORE VCT V PLC 
 
14 JUNE 2011 
 
 
RECOMMENDED PROPOSALS (the "Proposals") RELATING TO THE: 
  * RAISING OF  GBP46.8M OF CAPITAL; 
  * CASH DISTRIBUTION TO SHAREHOLDERS; 
  * THE TRANSFER OF CERTAIN ASSSETS OF THE VCTs TO CORE CAPITAL I LP; 
  * THE CANCELLATION OF CORE VCT'S SHARE PREMIUM ACCOUNT; AND 
  * NOTICE OF GENERAL MEETINGS OF VCTs 
 
 
INTRODUCTION 
Each  of Core VCT, Core VCT  IV and Core VCT V  (the "VCTs") has completed their 
investment  programme in  line with  their respective  investment policies.  The 
Boards  of the VCTs are, therefore, planning  the routes to maximise returns for 
Shareholders  as they seek to  realise the value in  the portfolio over the next 
few years and distribute the proceeds to Shareholders. 
 
The  VCTs are now fully invested in 13 companies with a current combined cost of 
 GBP45.1m  and an  audited NAV  and gross  asset value  (as at 31 December 2010) of 
 GBP58.5m  and  GBP59.0m respectively.  Of these, six of the largest companies, Kelway 
Holdings  Limited, Ark  Home Healthcare  Limited, Brasserie  Bar Co. plc, Colway 
Limited,  Better  at  Homes  Limited  and  SPL  Services Limited (the "Portfolio 
Companies")  have  grown  into  significant  businesses  of  scale, or where the 
opportunity  for further growth is greater than the Manager originally expected. 
 However,  the execution of their business  plans will require access to further 
capital  of  a  quantum  which  cannot  be  provided within the constraints of a 
venture capital trust structure. 
 
Accordingly,  the Boards of the VCTs, in consultation with the Core Capital LLP, 
the  investment manager (the  "Manager"), have deliberated  on and identified an 
alternative  strategy for  raising fresh  capital.  Outside  investors (the "New 
Investors")  have been identified who have agreed  to invest in a new fund, Core 
Capital  1 LP,  which  will  provide  this  expansion  capital for the Portfolio 
Companies. 
 
The  GBP46.8 million of additional capital from the New Investors will be used to: 
 
  * support the development of the Portfolio Companies 
  * support  the acquisition  of further  shares in  the Portfolio  Companies to 
    increase  participation in the  value growth that  is expected to be created 
    from the new investment 
  * provide  early  liquidity  for  Shareholders  by  way of an enhanced interim 
    dividend of 10p per Ordinary Share 
  * provide  additional cash headroom in  order to be able  to invest further in 
    the remaining companies in the VCTs' portfolio  should that be desired 
 
 
The VCTs will obtain an interest in Core Capital I LP, as part consideration for 
the transfer to it of their interests in the Portfolio Companies (the balance of 
consideration  being cash).   In addition,  the VCTs  will retain their existing 
interest  in  the  remaining  investee  companies, Pureleaf Limited, Adapt Group 
Limited, Allied International Holdings Limited, Cording Land LLP, Augentius Fund 
Administration  LLP and Camwatch Limited  (the "Residual Portfolio"), which will 
not  be transferred to Core  Capital I LP and  which will continue to be managed 
and owned as hitherto. 
 
Following  the completion of the Proposals, the VCTs will continue to be managed 
in  accordance with the original objectives set out at the time each of the VCTs 
was  launched.  In particular, with the  foreseeable funding requirements of the 
Portfolio  Companies having been met  as a result of  the Proposals, the Manager 
intends  to seek realisations across  the portfolio with the  aim of realising a 
majority  of the value within  a 3-4 year timeframe.  As  far as possible, it is 
intended  that the proceeds of such realisations are returned to Shareholders by 
way of distributions. 
 
Offer terms 
The  New Investors have offered to provide the  sum of  GBP46.8m to be used for the 
following purposes: 
 
  1. Growth capital for the Portfolio Companies                          GBP27.3m 
 
  2. Capital to acquire additional shares in the Portfolio Companies     GBP7.4m 
 
  3. Capital to enable cash distributions to be made                     GBP6.5m 
 
  4. Capital for the cost of the transaction and future operating costs  GBP3.9m 
 
  5. Capital available for investment in the Residual Portfolio          GBP1.7m 
 
     Total                                                               GBP46.8m 
 
 
To achieve the objectives of the recommended option: 
 
 a. Wholly  owned subsidiaries of the VCTs (the "Subsidiaries"), will contribute 
    a nominal sum to  Core Capital I LP, that will be managed by the Manager, in 
    return for a nominal interest in Core Capital I LP 
 b. the  VCTs will transfer  their interests in  the Portfolio Companies to Core 
    Capital I LP, in consideration for (i) the Subsidiaries, at the direction of 
    the VCTs, receiving an additional interest in Core Capital I LP and (ii) the 
    VCTs  receiving from the  New Investors, in  aggregate, a cash  sum of  GBP8.2m 
    which  cash sum  the VCTs  will use  to make  cash distributions  of 10p per 
    Ordinary Share, for working capital and/or the Residual Portfolio 
 c. In  addition to the payment of the cash  sum of  GBP8.2m referred to above, the 
    New Investors will commit  GBP38.6m to Core Capital I LP 
 d. the VCTs will make the cash distribution to Shareholders. 
 
 
As  derived from  the audited  accounts as  at 31 December 2010 and adjusted for 
further  investment in the Portfolio Companies since the year end, the aggregate 
value  of the VCTs interests in the Portfolio Companies amounts to  GBP37.6m.  Core 
Capital  I LP's assets  will on implementation  of the Proposals, comprise these 
interests  in the  Portfolio Companies  together with  commitments from  the New 
Investors  under the terms  of the limited  partnership agreement.  On the basis 
that  the  value  of  the  Portfolio  Companies remains unchanged for accounting 
purposes,  the aggregate committed capital of Core  Capital I LP will be  GBP76.2m, 
and the value of the VCTs' interest in Core Capital I LP will total  GBP22.5m. 
 
This value when added to the  GBP8.2m realised in cash, implies that Core Capital I 
LP  has invested in the Portfolio Companies  at an effective discount of 17.90% 
for Core VCT, and 19.55% for Core VCT IV and Core VCT V.  Based on the net asset 
values  as at 31 December 2010, this  is equivalent to a  reduction in the VCTs' 
net  asset values of  12.84% for Core VCT,  9.68% for Core VCT  IV and 9.24% for 
Core VCT V. 
 
The  discounts compare favourably with the share  price discount to NAV as at 6 
June 2011 for each of the VCTs being 53.37% for Core VCT, 51.99% for Core VCT IV 
and 41.72% for Core VCT V. 
 
The Boards have considered the NAV discounted price at which it is proposed that 
Core  Capital I LP will acquire the  interests in the Portfolio Companies, which 
is  largely due to the illiquid nature of the VCTs' investments in the Portfolio 
Companies  and the general lack of available  cash for growing businesses in the 
current  economic climate, and believe that it  is still in the best interest of 
Shareholders to proceed with the Proposals. 
 
Effect of the Proposals 
The  Proposals  will  impact  on  the  VCTs' assets, earnings and liabilities as 
follows:  the  Proposals  will  result  in  the VCTs' beneficial holdings in the 
Portfolio  Companies being  transferred to  Core Capital  I LP  at a discount to 
their  audited  valuations,  with  the  VCTs  receiving  cash  and,  through the 
Subsidiaries,  a minority interest in Core Capital I LP.  The assets of the VCTs 
will  be reduced by these discounts.  The net assets will also be reduced by the 
proposed  dividends of 10p per  Ordinary Share amounting  to  GBP6.5m in aggregate. 
 It  is not expected that  the Proposals will materially  impact on earnings and 
liabilities of the VCTs. 
 
Following  the completion of the Proposals, each  of the VCTs' interests in Core 
Capital  I LP will represent 65.22% of  Core VCT's portfolio, 36.30% of Core VCT 
IV's portfolio and 36.30% of Core VCT V's portfolio.  The VCTs' interests in the 
Residual Portfolio will continue to be managed and owned as hitherto. 
 
The  cash distribution to  be made to  Shareholders under the  Proposals will be 
subject,  in the case of Core VCT, to  the cancellation by Core VCT of its share 
premium  account  which  will  create  distributable  reserves allowing the cash 
distribution  to be made to Core VCT Shareholders and, in the case of all of the 
VCTs,  confirmation from HMRC that the cash distributions will not result in any 
tax  liability for individual Shareholders who acquired their shares in the VCTs 
within the annual  GBP200,000 limit and are at least 18 years of age. 
 
Terms for the Manager and Related Party Issues 
Under  the Proposals, the Manager will  continue to receive no annual management 
fees  directly  from  the  VCTs  and  the  existing  profit  share  and  B share 
arrangements are unchanged. 
 
Management  of Core Capital  I LP will  be undertaken by  the Manager, under the 
terms  of an investment management agreement  which will provide for its general 
partner  LP to receive   GBP750,000 per annum  until the fourth  anniversary of the 
completion of the Transfers, payable out of the assets of Core Capital I LP. 
 
The  Manager will also be entitled to receive carried interest payments from the 
investment  vehicle  of  the  New  Investors  which  will  have no effect on the 
distributions  or  profit  participation  entitlement  of the VCTs through their 
holdings in Core Capital I LP. 
 
As  the Proposals  involve the  transfer by  the VCTs  of their interests in the 
Portfolio  Companies to a newly formed fund which will be managed by the Manager 
(the  "Transfers") , the VCTs'  fund manager, and also  involve an investment by 
associates of Core Capital I LP, the entry into the Transfers and the investment 
by  the  associates  of  the  Manager  into  Core Capital I LP will constitute a 
related  party  transaction  for  the  purpose  of  the Listing Rules, and will, 
therefore,  require to be approved by Shareholders.  Shareholder consent is also 
required because the Transfers constitute Class 1 transactions under the Listing 
Rules. 
 
Conditionality of Proposals 
The  Proposals are subject to  (i) the entering by  the related parties into the 
partnership  agreement  relating  to  Core  Capital  I  LP  (ii)  the passing of 
resolution  1 at the General Meetings (iii)  the receipt of third party consents 
as  may be  required to  effect the  Transfers (iv)  the Manager  requesting the 
funding  that  the New Investors will have  committed to Core Capital I LP under 
the Proposals (v) the New Investors fulfilling this funding commitments and (vi) 
the completion of the Transfers.  The cash distribution to Core VCT Shareholders 
will also be conditional on the passing of resolution 2 that will be proposed at 
the  Core VCT General Meeting.  It is  anticipated that these conditions will be 
satisfied  shortly after  the passing  of the  resolutions at  the VCTs' General 
Meetings. 
 
 
Expected Timetable for Core VCT plc 
 
Last  time and  date for  receipt of  Forms of Proxy for 10.00 am on 5 July 2011 
General Meeting 
 
General Meeting                                          10.00 am on 7 July 2011 
 
Effective Date for transfer of the Portfolio                         7 July 2011 
Companies to Core Capital I LP 
 
Cancellation of the VCT's Share Premium Account                Early August 2011 
 
Ex-Dividend Date*                                                    August 2011 
 
Record Date for Dividend*                                            August 2011 
 
Dividend Payment Date*                                               August 2011 
 
 
  * subject to court approval of the cancellation of the share premium account 
 
 
 
Expected Timetable for Core VCT IV plc 
 
Last time and date for receipt of Forms                  10.30 am on 5 July 2011 
of Proxy for General Meeting 
 
General Meeting                           10.30 am on 7 July 2011 (or as soon as 
                                           practicable thereafter as the General 
                                            Meeting of Core VCT has concluded or 
                                                                 been adjourned) 
 
Effective  Date  for  transfer  of  the                              7 July 2011 
Portfolio 
Companies to Core Capital I LP 
 
Ex-Dividend Date                                                     August 2011 
 
Record Date for Dividend                                             August 2011 
 
Dividend Payment Date                                                August 2011 
 
 
Expected Timetable for Core VCT V plc 
 
Last time and date for receipt of Forms                  11.00 am on 5 July 2011 
of Proxy for General Meeting 
 
General Meeting                           11.00 am on 7 July 2011 (or as soon as 
                                           practicable thereafter as the General 
                                         Meeting of Core VCT IV has concluded or 
                                                                 been adjourned) 
 
Effective  Date  for  transfer  of  the                              7 July 2011 
Portfolio 
Companies to Core Capital I LP 
 
Ex-Dividend Date                                                     August 2011 
 
Record Date for Dividend                                             August 2011 
 
Dividend Payment Date                                                August 2011 
 
 
A  copy  of  the  circular  to  Shareholders  relating to the Proposals has been 
submitted  to the National Storage Mechanism and  is available to the public for 
viewing online at the following website address: http://www.hemscott.com/nsm.do 
 
For enquiries: 
 
Walid Fakhry 020 3179 0915 
Stephen Edwards 0203 179 0919 
Rhonda Nicoll 020 3179 0930 
 
 
 
 
 
 
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: Core VCT IV plc via Thomson Reuters ONE 
 
[HUG#1523006] 
 

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