Proposed Merger and Offer

JOINT ANNOUNCEMENT

11 OCTOBER 2024

PROPOSED MERGER AND OFFER

THAMES VENTURES VCT 1 PLC ("TV1")
THAMES VENTURES VCT 2 PLC ("TV2")
(TOGETHER, THE "COMPANIES")

RECOMMENDED PROPOSALS RELATING TO:
·    merger of the Companies;
·    offer for subscription following completion of the merger;
·    related party transaction with Foresight; and
·    related matters.

Following on from the pre-merger announcements released by each of the Companies on 26 July 2024, the boards of the Companies (the "Boards") are pleased to announce that they have agreed terms to merge the Companies (the "Merger") 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 Foresight Group LLP ("Foresight").

The Merger will be effected by TV2 being placed into members' voluntary liquidation pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986 ("Scheme"). Shareholders should note that the Merger by way of the Scheme will be outside the provisions of the City Code on Takeovers and Mergers. It is proposed that the name of TV1 be changed to "Foresight Ventures VCT plc" immediately following the Merger.

Upon completion of the Merger, holders of Ventures Share, Healthcare Share, AIM Share and DP67 Share classes in TV2 will each be issued with Ordinary Shares of TV1 ("Consideration Shares"). The boards of the Companies have agreed that, if the Merger is approved, the DP67 Shareholders in TV1 following the Merger (the "Enlarged Company") will be offered an opportunity to have their Consideration Shares repurchased by the Enlarged Company at a nil discount to NAV for the six months following completion of the Merger.

Each Scheme requires the approval of resolutions by the TV1 shareholders and the TV2 shareholders.

The Merger will, if effected, result in an enlarged company with net assets of approximately £121 million.

Estimated costs of the Merger are £495,000, but Foresight has agreed to contribute 20% of the costs, so net costs for shareholders of the Companies will be, in aggregate £396,000. These net costs will be borne 30% and 50% by TV1 and TV2 respectively (and pro rata to the net asset values of the classes in TV2). Based on the amount of estimated Merger costs to be borne by TV1 and TV2 of approximately £396,000 and the expected aggregate annual costs savings of £260,000, such Merger costs would be recovered in approximately 18 months.

The Enlarged Company will continue to operate the Investment Policy currently operated by TV1.

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
VCTs are required to be listed on the closed ended-investment funds segment of the Official List, which involves a significant level of costs associated with the listing as well as related fees to ensure they comply with all relevant legislation and regulations. A larger VCT is able to spread the fixed elements of such running costs across a larger asset base and, as a result, reduce running costs as a percentage of net assets.

With the above in mind, the Boards and Foresight entered into discussions to consider a merger of the two Companies to create a single, larger VCT. The aim of the Merger is primarily to achieve strategic benefits, reductions in the annual running costs for each set of shareholders and an enhanced ability to raise capital in the future.

THE SCHEMES
The Merger will be effected in the following way.

First, TV2 will be placed into members’ voluntary liquidation pursuant to a scheme of consolidation under section 110 of the Insolvency Act 1986, subject to shareholders’ approval.

Secondly, all of the assets and liabilities of TV2 will be transferred to TV1 in consideration for the issue of Consideration Shares by TV1 directly to the shareholders of TV2.

The Scheme requires the prior approval of the shareholders of TV1 and TV2. If a shareholder of TV2 does not vote in favour of the Merger and expresses their dissent in writing then they may require the Liquidators to purchase their shares at their break-value price, this being an estimate of the amount they would receive in an ordinary winding up of TV2 if all of the assets had to be realised. The break-value is expected to be significantly below the net asset value of TV2.

For these purposes, whilst there will only be one general meeting of TV1 at which shareholders will be invited to consider and vote in favour of the Merger, there will be two general meetings for TV2. At the First General Meeting of TV1, its shareholders will be invited to approve the Merger. At the Second General Meeting of TV2, its Shareholders will be invited to pass a special resolution for the winding up of the company.

In addition to the approval of Shareholders being sought at the General Meetings, each Scheme is dependent on:

notice of dissent not being received from TV2 shareholders who hold more than 10% in nominal value of the issued share capital;
TV1 confirming that it has received no notice of any claims, proceedings or actions of whatever nature threatened or commenced against TV2 which the board of TV1 regard as material; and
TV1 and TV2 maintaining their VCT status,

and so will proceed and become effective immediately after the passing of the special resolution for the winding up of TV2.

The number of Consideration Shares to be issued will be as set out below:

	Number in issue as at 30 June 2024	Consideration Shares to be issued on Merger
Ventures Shares	53,236,858	53,250,187
Healthcare Shares	23,554,915	20,874,090
AIM Shares	2,695,803	6,029,714
DP67 Shares	11,192,136	6,632,685

The 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. TV2 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 6 December 2024 (the cancellation requiring the approval of TV2’s shareholders).

The boards of the Companies consider that the Merger will bring a number of benefits to all of the Companies' groups of shareholders as described below, in summary:

the Enlarged Company would have a net asset base of approximately £121 million and so greater scale to raise and deploy capital in the future;
with more capital to deploy, the Enlarged Company should have greater capacity to support its portfolio companies
an enhanced ability to complete investments in new opportunities;
although the Companies have co-invested in a significant number of the same businesses (approximately 70% of TV2’s investee companies also have TV1 as an investor), their portfolios are not identical and so the Merger will create some additional diversification for both sets of shareholders;
a simplified strategy and product offering (including greater simplicity of administration and performance monitoring for those Shareholders who currently hold shares in both Companies);
lower running costs per share due to the spreading of fixed costs over a larger asset base;
an enhanced ability to maintain regular and consistent dividend payments to shareholders; and
enhanced liquidity and reserves to buy shares back in the market from those shareholders who want or need to sell their investment, subject always to shareholder authority and the availability, at the discretion of the Enlarged Company’s board, of sufficient cash and distributable reserves. Note: if the Merger is approved, the Board also intends to reduce the Company's target discount for buybacks from 5.0% of AV to 2.5%.

Additional attractive features of the Merger include:

Foresight has agreed to contribute 20% of the costs of the Merger meaning that TV1 and TV2 will only bear £396,000 of the £495,000 estimated costs; and
there is no impact on the tax position of Shareholders – existing VCT tax reliefs carry over and attach to the post-Merger shares for all Shareholders.

EXPECTED TIMETABLE FOR THE MERGER	2024
Latest time for the receipt of forms of proxy for the TV1 General Meeting	10.30 a.m. on 6 November
TV1 General Meeting	10.30 a.m. on 8 November
Calculation Date	14 November
Effective Date for the transfer of the assets and liabilities of TV2 to TV1 and the issue of Consideration Shares	15 November
Announcement of the results of the TV1 General Meeting and completion of the Scheme	15 November
Admission and dealings in the Consideration Shares to commence	18 November
CREST accounts credited with the Consideration Shares issued pursuant to the Schemes	18 November
Certificates for Consideration Shares dispatched by	28 November

EXPECTED TIMETABLE FOR TV2
	2024
Date from which it is advised that dealings in TV2 Shares should only be for cash settlement and immediate delivery of documents of title	1 November
Latest time for receipt of forms of proxy for the TV2 First General Meeting	4:00 p.m. on 6 November
First TV2 General Meeting	4:00 p.m. on 8 November
Latest time for receipt of forms of proxy for the TV2 Second General Meeting	11.00 a.m. on 13 November
TV2 register of members closed	5.00 p.m. 14 November
Record Date for TV2 Shareholders’ entitlements	5.00 p.m. 14 November
Calculation Date	after 5.00 p.m. on 14 November
Dealings in TV2 Shares suspended	7.30 a.m. on 15 November
Second TV2 General Meeting	11.00 a.m. on 15 November
Effective Date for the transfer of the assets and liabilities of TV2 to TV1 and the issue of Consideration Shares pursuant to the Scheme	15 November
Cancellation of the listing of the TV2 Shares	7.30 a.m. on 6 December

THE TV1 BOARD

The Boards have considered what the size and future composition of the TV1 Board should be following the Merger and it has been agreed that subject to completion of the Merger, Dr Andrew Mackintosh, currently a director of TV2, will be appointed to join the existing TV1 Board.

TV1 SHARE REDESIGNATION, RENEWAL OF SHARE ISSUE AND BUYBACK AUTHORITIES AND CANCELLATION OF SHARE CAPITAL AND RESERVES
There will be a number of consequential resolutions to be passed by TV1 shareholders in respect of the Merger:

1. The Enlarged Company will be renamed "Foresight Ventures VCT plc"

2. Re-designation of Ordinary Shares into Deferred Shares

The TV1 Board shall be authorised to convert a number of TV1’s ordinary shares, up to 150,000,000, into deferred shares (carrying no substantive rights and which will shortly thereafter be bought back by TV1 for nominal consideration and cancelled).

The purpose of this measure is simply to increase the value per share of the remaining TV1 Ordinary Shares from the current 45.9p (as at 30 June 2024) to a round £1.00 per share. This action does not affect in any way the value of each investor’s overall shareholding, but it does simplify and enhance future marketing and marks the start of a new growth phase for the Enlarged Company under the new management of Foresight.

3. Composite authority to renew allotment and repurchase authorities

This is a composite resolution which, if passed, would authorise the Directors to issue Ordinary Shares pursuant to the Offer, free from pre-emption rights and also to make market purchases of Ordinary Shares up to a maximum of 14.99% of the Ordinary Shares in issue. The TV1 Board intends to utilise the allotment authority to allot Offer Shares. The authority to disapply pre-emption rights is limited to the allotment of equity securities with an aggregate nominal value not exceeding £110,000 which would represent 6.4% of TV1’s ordinary share capital in issue at the date of the Circular. The authorities granted by that resolution will lapse on the conclusion of the next annual general meeting of TV1 unless they are renewed prior to such time.

RELEVANT RELATED PARTY TRANSACTION

It is proposed that a new Performance Incentive Agreement be entered into between TV1 and Foresight pursuant to which a performance fee would be payable to Foresight at the end of each Performance Period, subject to the Hurdle being satisfied at the end of the relevant Performance Period, equal to the lesser of: (i) 20% of the Distributions per Share paid from available distributable profits of the Company attributable to the relevant Performance Period; or (ii) 20% of the Excess Annual Return per Ordinary Share, in each case, multiplied by the weighted average number of TV1 Ordinary Shares in issue during the relevant Performance Period.

For these purposes:

"Distributions" means:	all payments of whatsoever nature including all income and capital distributions (whether in cash or in specie) made by the Company after the Effective Date to holders of its Ordinary Shares in issue at any time and remaining in issue, stated on a per Ordinary Share in issue basis as at the date on which, from time to time, the Performance Fee is calculated;
"Excess Annual Return Per Ordinary Share" means:	an annual increase in the Total Return Per Ordinary Share which is higher than the Hurdle;
“Hurdle" means:	the greater of (i) a Total Return of 110p Per Ordinary Share, as increased in line with the average Bank of England Bank Rate over the relevant Performance Period; and (ii) the highest previously recorded Total Return per Share;
"Performance Period" means:	the first Performance Period would begin on the Effective Date for the Merger with TV2, if this is approved by Shareholders, and would end on 31 March 2025 and each subsequent Performance Period would be a period commencing on the date immediately following the expiry of the previous Performance Period and ending 12 months later or, as the case may be, on the termination of the Investment Services Agreement; and
"Total Return" means:	at any particular time, the sum of the Net Asset Value of the Ordinary Shares; the aggregate of all Distributions paid or made at any time to Ordinary Shareholders after the Effective Date; and the aggregate of all Performance Fees previously paid to Foresight after the Effective Date.

TV1 is a closed ended investment fund and its investment manager is Foresight. Accordingly, pursuant to UKLR 11.5.3R, Foresight is a related party of the Company. The entry into the revised performance incentive arrangements with Foresight described above will therefore constitute a related party transaction under the UK Listing Rules (the "Related Party Transaction"). Accordingly, the approval of Shareholders for TV1's entry into the Related Party Transaction is required in accordance with UKLR 11.5.5R(2).The Board of TV1 considers the Related Party Transaction to be fair and reasonable as far as the Company’s shareholders are concerned and the Directors have been so advised by Dickson Minto Advisers LLP, the Company’s Sponsor. In providing its advice to the directors, Dickson Minto Advisers LLP has taken into account the Directors’ commercial assessment of the effects of Related Party Transaction.

OFFER

As TV1 is required to prepare a prospectus in connection with the Merger, the opportunity has been taken to also include an offer for subscription in respect of the Enlarged Company. This will provide Shareholders and new investors with the opportunity to invest in the Enlarged Company and benefit from the tax reliefs available to qualifying investors. Both of the Boards support the Enlarged Company raising further funds.

The amount sought under the Offer is £5 million (with an over-allotment facility of a further £5 million) (the "Offer").

The Offer has been designed for Investors seeking a portfolio of young growth investments, whilst taking advantage of the VCT tax reliefs. TV1 is seeking to raise additional gross proceeds of £5 million, together with an over-allotment facility of up to a further £5 million.

The new funds raised will allow new and existing Shareholders to benefit from TV1 being able to participate in attractive investment opportunities in well managed businesses that need capital to expand and also support existing portfolio companies as they develop. By raising more capital, the running costs per Share in TV1 for existing Shareholders will be reduced as the fixed costs are spread over a larger asset base.

The Offer opens at 3.00 p.m. on 15 November 2024 and will close at 4:00 p.m. on 30 April 2025 (or earlier at the discretion of the directors or if full subscription is reached or later if extended). Applicants who wish to have some or all of their New Shares allotted in the tax year 2024/25 must return their completed Application Form, with cleared funds received by the receiving agent, by 10.00 a.m. on 3 April 2025. Investors must be over 18 years old.

Foresight Group Promoter LLP (the "Promoter") is acting as the promoter to the Offer. The Promoter will receive a fee of either 2.5% or 5.5% of the amount subscribed under the Offer dependent on the type of investor. All other costs, charges and expenses of or incidental to the Offer shall be paid by the Promoter from its fees save for trail commission (where permissible) which shall be paid by TV1 and initial commission and the facilitation of up-front adviser charges each of which shall be paid by TV1 through the application of a pricing formula. In respect of each investor, the Promoter’s fee will be reduced by loyalty and early investment discounts. Foresight Group as Investment Manager has provided a guarantee to TV1 in respect of the obligations of the Promoter under this agreement.

DOCUMENTS AND APPROVALS

TV1 shareholders will receive a copy of a circular convening the TV1 general meeting to be held on 8 November 2024 at which TV1 shareholders will be invited to approve resolutions in connection with the proposals.

The TV2 shareholders will each receive a circular convening the Target VCTs' first general meetings on 8 November 2024 and the second general meeting on 15 November 2024 at which TV2’s shareholders will be invited to approve resolutions in connection with their relevant Scheme.

Copies of the Prospectus, the TV1 circular and the TV2 circulars have been submitted to the FCA. The Prospectus accompanies this document and is available in hard copy from the Companies’ registered office during normal business hours and at https://www.foresight.group/products/thames-ventures-vct-1-plc and the national storage mechanism (www.morningstar.co.uk/uk/NSM).

For further information, please contact:

Investment Manager to the Companies
Foresight Group LLP
Telephone: 0203 667 8100

Sponsor to TV1
Dickson Minto Advisers LLP
Telephone: 0131 200 1661

The directors and proposed director of TV1 accept responsibility for the information relating to TV1 and its directors and proposed director 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 TV1 and its directors and proposed director 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 TV2 accept responsibility for the information relating to TV2 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 TV2 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.

Dickson Minto Advisers LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as sponsor for TV1 and no one else and will not be responsible to any other person for providing the protections afforded to customers of Dickson Minto Advisers LLP or for providing advice in relation to any matters referred to herein.