Proposed change of company's investment policy ,change of name and notice of general meeting
20 1월 2011 - 12:28AM
UK Regulatory
TIDMSVC2
Not for release, publication or distribution (in whole or in part) in, into or
from any jurisdiction where to do so would constitute a violation of the
relevant laws of such jurisdiction
For immediate release
19(th) January 2011
SPARK VCT 2 plc
("SPARK" or the "Company")
Proposed change of Company's investment policy and change of name
SPARK is today posting a circular (the "Circular") which convenes the necessary
General Meeting to implement proposals for a change in SPARK's investment policy
and a change of SPARK's company name and to seek Shareholder approval for these
proposals.
PROPOSED AMENDMENT TO INVESTMENT POLICY
As described in the announcement on 9(th) December 2010, the Board believes that
it is in Shareholders' interests to adopt a new investment policy with a view to
building a portfolio that comprises a greater proportion of lower risk, income
producing investments with a lesser proportion of higher risk investments with
greater growth prospects. Further details of the proposed new investment policy
are set out below.
The proposed amendment of the investment policy will be subject to Shareholder
approval through an Ordinary Resolution to be put to Shareholders at the General
Meeting on 10(th) February 2011.
Existing Investment Policy
The Company's investment policy as stated in the latest Annual Report as at
31(st) December 2009 was as follows:
"To invest principally in a diversified venture capital portfolio, including
unquoted companies with good growth prospects and companies whose shares are
traded on AIM and also in a portfolio of listed equities and fixed-interest
securities.
The intended asset allocation was for 85 per cent. of net assets to be allocated
to a venture capital portfolio designed to achieve capital growth, with the
balance to be held in capital-secure liquid markets as a reserve for follow-on
financing of companies in the existing venture capital portfolio or to meet the
net operating expenses of the Company.
The percentages may be varied from time to time so that, for example, the asset
allocation could involve a higher percentage of venture capital investments if
the reserve is fully utilised for follow-on investment in the venture capital
portfolio.
Risk diversification within the venture capital portfolio will be achieved by a
spread of investments across different industry sectors (mainly in the TMT and
healthcare sectors) and investment stages.
The target size for venture capital investments at date of first investment will
be between GBP500,000 and GBP1.0 million (which may be increased with subsequent
follow-on investment) and no single investment at cost will normally exceed 5
per cent. of the Company's net asset value.
From time to time, the venture capital portfolio may include listed, NASDAQ-
traded or AIM-traded companies in which investment was originally made on an
unquoted basis.
Gearing will not normally be employed.
The Directors intend that the Company will continue to qualify as a Venture
Capital Trust under the provisions of sections 258-332 of the Income Tax Act
2007. Under these provisions, it is a requirement that not more than 15 per
cent. of the Company's gross assets be invested in the securities of any one
company or group (aggregating for this purpose any existing holding in the
company concerned). From time to time, however, within the portfolio of fixed-
interest securities, more than 15 per cent. of the Company's gross assets may
be invested in a single government stock (e.g. a short-dated gilt)."
Track Record under the existing investment policy
The Company has not delivered satisfactory returns to Shareholders under the
existing investment policy set out above. For every GBP1 invested:
· in Quester VCT 4 PLC in November 2000, Shareholders have received a total
return, excluding tax reliefs, of 36.9 pence per Ordinary Share comprising
dividends combined with net asset value per Ordinary Share as at 30(th) June
2010;
· in Quester VCT 5 PLC in December 2001, Shareholders have received a total
return, excluding tax reliefs, of 47.3 pence per Ordinary Share comprising
dividends combined with net asset value per Ordinary Share as at 30(th) June
2010.
The Board announced on 29(th) January 2010 that 50 per cent. of cash proceeds
from realisations would be regarded as available for distribution and that new
investment would be targeted at more mature companies. Subsequent to this, and
as explained above, it was decided to appoint a new investment manager,
accompanied by a new yield-driven investment focus. Given this change, it is the
Board's view that a more sustainable result should now be achieved over the
longer term by pursuing the New Investment Policy set out below which has the
objective of producing a predictable and sustainable dividend stream for
Shareholders.
Proposed New Investment Policy
The Board proposes, therefore, an amended investment policy, in line with other
VCTs managed by Albion, intended to produce a regular and predictable dividend
stream with an appreciation in capital value as set out below.
The Company intends to achieve its strategy by adopting an amended investment
policy for new investments which, over time, will rebalance the portfolio such
that approximately 50 per cent. of the portfolio comprises an asset-based
portfolio of lower risk, ungeared businesses, principally operating in the
healthcare, environmental and leisure sectors (the "Asset-Based Portfolio"). The
balance of the portfolio, other than funds retained for liquidity purposes, will
be invested in a portfolio of higher growth businesses across a variety of
sectors of the UK economy. These will range from lower risk, income producing
businesses to a limited number of higher risk technology companies (the "Growth
Portfolio").
In neither category would portfolio companies normally have any external
borrowing with a charge ranking ahead of the VCT. Up to two thirds of qualifying
investments by cost will comprise loan stock secured with a first charge on the
portfolio company's assets.
The Company's investment portfolio will thus be structured to provide a balance
between income and capital growth for the longer term. The Asset-Based Portfolio
is designed to provide stability and income whilst still maintaining the
potential for capital growth. The Growth Portfolio is intended to provide highly
diversified exposure through its portfolio of investments in unquoted UK
companies.
Funds held pending investment or for liquidity purposes will be held as cash on
deposit or in floating rate notes or similar instruments with banks or other
financial institutions with a Moody's rating of 'A' or above.
The Company's investment allocation and risk diversification policies are
substantially driven by the relevant HMRC rules and it is the intention of the
Company to apply the following policies in this respect:
(1) The Company's income will be derived wholly or mainly from shares
and securities;
(2) At least 70 per cent. of the value of its investments will be
represented throughout the year by shares or securities that are classified
as'qualifying holdings';
(3) At least 30 per cent. by value of its total qualifying holdings will
be represented throughout the year by holdings of 'eligible shares';
(4) At no time during the year will the Company's holdings in any one
company exceed 15 per cent. by value of its investments;
(5) The Company will not retain greater than 15 per cent. of its income
earned in the year from shares and securities; and
(6) Eligible shares will comprise at least 10 per cent. by value of the
total of the shares and securities that the Company holds in any one portfolio
company.
These tests drive a spread of investment risk through disallowing holdings of
more than 15 per cent. in one portfolio company.
'Qualifying holdings', for the Company include shares or securities (including
loans with a five year or greater maturity period) in companies which operate a
'qualifying trade' wholly or mainly in the United Kingdom.
'Qualifying trade' excludes, amongst other sectors, dealing in property or
shares and securities, insurance, banking and agriculture. The Company may not
control a portfolio company.
There is an annual investment limit of GBP1 million in each portfolio company.
Gearing will not normally be employed. As defined by the Articles of
Association, the Company's maximum exposure in relation to gearing is restricted
to an amount equal to the Adjusted Capital and Reserves.
From 1(st) January 2011, the Company will co-invest with the other 8 VCTs
managed by Albion and allocation to new investments between the Albion VCTs will
be in accordance with the ratio of funds available for investment subject to the
investment policy of each Albion VCT and a limited number of provisions to
protect each participating Company.
As this is a material amendment to the existing investment policy, under the
UKLA Listing Rules, Shareholder approval is required. If so approved by
Shareholders, the elements of the proposed amended investment policy set out
above will replace the Company's existing investment policy.
DIVIDEND POLICY
The Board's existing dividend policy is to return 50 per cent of sale proceeds
realised from current portfolio investments to Shareholders by way of dividends.
In view of Albion's track record of generating deal flow of the sort of
opportunities the Company is now targeting and, given the Board's intention to
build up a portfolio of income yielding securities, it is intended that a
greater proportion of cash available from disposals should be devoted to new
investment rather than to dividends.
The Board's intention is to establish a sustainable and progressive dividend
stream to Shareholders, with the prospect of a gradual recovery in capital
value. The Board intends that it will recommend a final dividend of 1 penny per
Ordinary share in respect of the year ending 31(st) December 2010, subject to
the audit, which reflects the previous policy. The Board expects to publish the
results for the period ending 31(st) December 2010 in April 2011.
Thereafter, the initial annual dividend target will be 1 pence per Ordinary
share per annum, but it is hoped it will increase over time as exits are
achieved and the new investment policy is implemented.
SHARE BUY-BACK POLICY
The Company's existing buy-back policy is as follows:
"There is a very limited secondary market for shares in Venture
Capital Trusts generally. The Company will continue to be willing to make buy-
backs of limited volumes of its shares but expects that, going forward, the
budget made available to fund buy-backs will be more tightly restricted than in
previous years. Its ability to do so is, or may be, constrained by the level of
its own liquid resources, VCT specific legislation and the regulations of the
UKLA."
In general, the other Albion managed VCTs have a share buy-back policy to make
purchases in the market in the region of a 10 to 15 per cent. discount to net
asset value, so far as market conditions, liquidity, and reserves permit. Such
buy-backs, are subject to the overall constraint that such purchases are in the
Company's interest, including the maintenance of sufficient resources for
investment in existing and new investee companies and the continued payment of
dividends.
In order to maintain resources for dividends and the implementation of the new
investment policy, the Board does not intend to buy back any shares in the
financial year to 31 December 2011. However, it intends to be able to implement
the share buy-back policy practiced by the other Albion VCTs once the fruits of
the new investment policy have begun to show.
CHANGE OF NAME
In order to reflect the change of Manager, the Board proposes that the name of
the Company should be changed to "Kings Arms Yard VCT 2 PLC", King's Arms Yard
being the address of Albion.
General Meeting
There will be a General Meeting of the Company held at The City Club, 19 Old
Broad Street, EC2N 1DS on 10(th) February 2011 at 11 a.m.
At the General Meeting, the following resolutions will be proposed:
1. an ordinary resolution to change the Company's investment
policy; and
2. a special resolution to change the name of the Company.
Timetable
Posting of Circular.................................. 19(th) January 2011
Last time and date of receipt of proxies
(including electronic proxies and CREST voting).......... 11 a.m. on 8(th)
February 2011
General Meeting to be held at the City Club,
19 Old Broad Street, EC2N 1DS.................... 11 a.m. on 10(th) February
2011
Further Information
A Circular is being posted to Shareholders today.
Copies of the Circular are available on the SPARK website www.albion-
ventures.co.uk/ourfunds/spark_VCT.html and may be obtained from the Company
Secretary, Albion Ventures LLP by contacting Albion Ventures on 020 7601 1850.
A copy of the Circular has been submitted to the National Storage Mechanism and
is available for inspection at www.Hemscott.com/nsm.do.
Enquiries to:
Patrick Reeve/Robert Whitby-Smith
Managing Partner/Partner
Tel: 020 7601 1850
Definitions
Capitalised terms have the meaning set out in the definitions section of the
Circular unless the sense or context determines otherwise.
Circular 19.01.2011:
http://hugin.info/145617/R/1480853/416240.pdf
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: Spark VCT 2 PLC via Thomson Reuters ONE
[HUG#1480853]
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