Investment West Midlands plc
LSE : IWM

October 15, 2009 09:00 ET

Proposed Acquisition of Bluehone Limited

                                                                                                    15/10/2009
                                                                                     GB00B0LFRQ80/GBP/PLUS-exn

                                         INVESTMENTS WEST MIDLANDS PLC
                                           ("IWM" or the "Company")
                                                       
                                   Proposed Acquisition of Bluehone Limited
                                                       
                                                 Rule 9 Waiver
                                  Strategic Agreement with Evolve Capital plc
                          Acquisition of interest in Elderstreet Investments Limited
                                    Change of Name to Bluehone Holdings plc
                                    Adoption of New Articles of Association
                                           Notice of General Meeting
                                                      and
                                        Re-Admission to trading on PLUS

Highlights

    *       IWM is proposing to acquire Bluehone, a  fund management company focused on small company investment
            funds
        
    *       Consideration  for the Acquisition is £1,500,000 to be satisfied by the issue of  75,000,000  new
            ordinary shares in IWM

    *       Bluehone intends to develop as a fund management business with a focus on smaller quoted companies and
            private equity situations

    *       As the first stage in this strategy, the Company has:

            *       Entered into a strategic agreement with Evolve Capital
            *       Acquired an interest in Elderstreet  Investments Limited
                 
    *       Bluehone also intends to  participate in consolidation in the small company funds sector in due course
        
    *       The  acquisition  of  Bluehone by IWM is a reverse takeover and is subject  to  the  approval  of
            shareholders at a General Meeting of the Company which is being convened for 9 November 2009
        
    *       The Company will be re-named "Bluehone Holdings plc" following Completion

John Wheatley, Chairman of IWM said:
"This deal represents a great opportunity for the shareholders of IWM to take a position in a developing  fund
management business which operates in a sector that is full of potential".

Bill Brown of Bluehone commented:
"I  am  excited to be taking Bluehone forward to its next stage of development as a public company.  I believe
that access to the capital markets will create a number of opportunities for us".

Enquiries:

Investments West Midlands Plc
John Wheatley                                                                            01926 888 302

Bluehone Limited
Bill Brown                                                                               020 7496 8929

St Helens Capital Partners LLP
Mark Anwyl or Duncan Vasey                                                               020 7368 6959
                                                       
                                                       
                                                       
                                         INVESTMENTS WEST MIDLANDS PLC
                                           ("IWM" or the "Company")
                                                       
                                   Proposed Acquisition of Bluehone Limited
                                                       
                                                 Rule 9 Waiver
                                  Strategic Agreement with Evolve Capital plc
                          Acquisition of interest in Elderstreet Investments Limited
                                    Change of Name to Bluehone Holdings plc
                                    Adoption of New Articles of Association
                                           Notice of General Meeting
                                                      and
                                        Re-Admission to trading on PLUS

1.      INTRODUCTION

IWM  announces  that  it  has today entered into a conditional agreement to acquire the  entire  issued  share
capital  of  Bluehone, a fund management company focussed on small company investment funds. The consideration
payable  for  the  Acquisition  is  £1.5  million which will be satisfied  by  the  issue  of  the  75,000,000
Consideration Shares to the Vendor Concert Party.

The  Acquisition will give rise to a fundamental change to the business, board composition and voting  control
of  IWM and will constitute a reverse takeover under the PLUS Rules which will require Shareholders' approval.
Trading  in  the  Ordinary  Shares on PLUS was suspended on 22 May 2009 following the  announcement  that  the
Company  was  in  discussions regarding a possible reverse takeover. Trading is expected to  remain  suspended
until  Shareholder approval for the Acquisition has been received. Shareholders are also required  to  approve
the  waiver of certain obligations which would otherwise be imposed on the Vendor Concert Party by Rule  9  of
the  City  Code as a result of the issue to them of the Consideration Shares pursuant to the Acquisition.  The
Company  has  also  entered into a strategic agreement with Evolve and has agreed to acquire  an  interest  in
Elderstreet.

Accordingly,  a  General Meeting of the Company is being convened at which resolutions  will  be  proposed  to
approve  the  Acquisition  and the Waiver. Resolutions will also be proposed at the meeting  to  increase  the
Company's  authorised  share  capital, to authorise the Directors to allot Ordinary  Shares  pursuant  to  the
Proposals  and  otherwise,  to  approve the Evolve Agreement, to adopt the New  Articles  and  to  change  the
Company's name to "Bluehone Holdings plc" following Completion.

The  Company  is  today posting a circular to Shareholders explaining the background to and  reasons  for  the
Proposals  and explaining why the Existing Directors consider them to be in the best interests of the  Company
and  Shareholders  as a whole and to seek Shareholders' approval for the Resolutions to  be  proposed  at  the
General Meeting.

2.      INFORMATION ON IWM AND REASONS FOR THE PROPOSALS

IWM  was incorporated on 18 May 2005 and was admitted to trading on PLUS on 27 September 2005. The Company was
established as an "Investment Vehicle" which was intended to invest in businesses in the West Midlands  region
of the UK. At the time of the Company's formation, the Existing Directors believed that there were a number of
potentially  attractive investment opportunities in that region. The Company's 2005 admission document  stated
that  the  Company  had  a  period  of 24 months from flotation within which to  complete  an  acquisition  or
investment.  After  IWM's flotation, the Existing Directors researched and identified a  number  of  potential
acquisition opportunities in accordance with IWM's stated investment strategy.

In September 2007, however, the Existing Directors informed Shareholders that, although progress had been made
with  a  number of potential acquisition or investment opportunities, due diligence undertaken by the Existing
Directors  had lead them to conclude that these opportunities were not suitable for the Company. The  Existing
Directors  therefore requested additional time to find an appropriate opportunity and a resolution was  passed
in  September  2007  to  extend the period in which the Company was required to  complete  an  acquisition  or
investment to 31 December 2008, failing which, the Company would be wound up.

During  this  extended  period,  although agreement in principle was reached  with  three  potential  investee
companies, it was not possible to conclude a transaction which the Existing Directors believed was appropriate
for and in the best interests of the Company.

In  December  2008,  the  Company  received a requisition notice under  section  303  of  the  2006  Act  from
Shareholders holding approximately 10 per cent. of the issued Ordinary Shares. These Shareholders  convened  a
general  meeting of the Company held on 7 January 2009 at which resolutions were proposed to implement certain
changes  to  the  board  of the Company and to take all necessary steps to wind up the Company.  The  Existing
Directors did not believe that these proposals were in the best interests of the Company as they believed that
it  was  close  to completing an acquisition. The proposed resolutions were not passed at the  meeting  but  a
resolution was passed at the meeting to extend the acquisition or investment deadline to 31 December 2009.

Notwithstanding  this extension, the Existing Directors considered that, if the contemplated  acquisition  was
not  completed  by  30  April 2009, they would take appropriate steps to wind up the Company  and  return  the
capital in the Company to Shareholders.

The  Existing  Directors were not able to conclude a transaction by 30 April 2009 and were about  to  commence
making  arrangements  to  wind  the  Company up when they received an approach  from  Bluehone  regarding  the
Acquisition.  Although Bluehone does not meet all the criteria for investment set out in  the  2005  Admission
Document,  the Existing Directors nevertheless believe that the Acquisition represents an exciting opportunity
for the Company and is in the best interests of Shareholders.

3.      INFORMATION ON BLUEHONE

Introduction

Bluehone  was  incorporated  on  30 July 2004 and acquired Bluehone Investors  on  21  August  2009.  Bluehone
Investors  is a fund management company focussed on managing small company investment funds. Through  Bluehone
Investors, Bluehone currently manages two closed end investment companies which are listed on the London Stock
Exchange.  As  at  30 September 2009, Bluehone had approximately £59 million of funds under management.  These
funds are predominately invested in companies listed on AIM. Bluehone Investors is authorised and regulated by
the FSA.

Bluehone intends to expand the size, scale and areas of its operation through launching new funds of its  own,
acquiring fund management mandates and through strategic acquisitions.

Background to Bluehone Investors

Bluehone  Investors was established as a limited liability partnership in January 2005. The founding partners,
Bill Brown, Robert Mitchell and Stuart Rollason, were all previously employed at FCAM and in May 2005 FCAM was
introduced as a partner in the business. The equity of the partnership was owned 100 per cent. by the founding
partners and the interest of FCAM is represented by a profit share determined by excess revenues achieved from
the initial clients over a hurdle amount.

Bluehone  Investors  commenced trading in May 2005, when fund management contracts  were  signed  with  Active
Capital Trust plc, Bluehone AiM VCT plc and Bluehone AiM VCT2 plc.

On 31 March 2009, Bluehone Limited was introduced as a partner in Bluehone Investors, assuming a 9.9 per cent.
equity  interest.  On  21  August 2009, Bluehone became the 100 per cent. owner  of  the  equity  in  Bluehone
Investors.  Bluehone is owned by the founding partners of Bluehone Investors in the same proportion  to  their
equity interest in Bluehone Investors and is the entity being acquired under the Acquisition.

Bluehone  currently employs five members of staff, including the partners, all of whom are  based  in  London.
Bluehone's  employees comprise four fund managers and one administrator. On Completion, William Brown,  Robert
Mitchell and Stuart Rollason will become directors of the Company.

Sources of Revenue

Bluehone  Investors' principal sources of revenue are the management fees which it charges  on  the  funds  it
manages.  Management  fees are calculated on a percentage of funds under management.  The  level  of  Bluehone
Investors' fee income therefore depends on:

*       the general levels of stock markets;

*       the performance of specific funds managed by Bluehone Investors;

*       the launch of new funds managed by Bluehone Investors; and

*       Bluehone being awarded fund management contracts for existing funds.

Funds Managed by Bluehone Investors

Bluehone Investors currently manages two funds.

ACTIVE CAPITAL TRUST PLC
Active  Capital  is  an investment trust invested predominantly in assets traded on AIM.  Active  Capital  has
historically used gearing to seek to enhance returns and at 31 May 2008 had bank debt of £30 million and total
assets  of £93 million. In the year to 31 May 2009, £19.6 million of Active Capital's debt was repaid  with  a
like-for-like fall in Active Capital's total assets of 36.7 per cent., which compares to the fall in the  FTSE
AIM Index of 49.2 per cent. over the same period. However, the gearing effect and revenue costs resulted in  a
58  per cent. fall in net asset value over the year. As at 30 September 2009, Active Capital had net assets of
£33.7 million and had paid down a further £10.4 million of debt since the year end.

Active Capital was scheduled to have a continuation vote at a General Meeting in October 2009. However,  after
a  strategic  review,  the board of directors of Active Capital, in consultation with Active  Capital's  major
shareholders, decided to place the fund into an orderly realisation mode.

Following  the  approval  of  Active Capital's shareholders at a meeting held  on  27  August  2009,  Bluehone
Investors was appointed to manage the orderly realisation process with the objective of maximising shareholder
return in the most appropriate time scale.

Bluehone  Investors will receive specified monthly fees as well as additional fees based  on  the  timing  of
realisations and the value achieved for shareholders of Active Capital.

BLUEHONE AiM VCT2 plc
Bluehone AiM VCT2 is a venture capital trust invested in securities traded on AIM. The company is the  result
of a merger between Bluehone AiM VCT plc and Bluehone AiM VCT2 plc which was concluded in July 2008. As at 30
September  2009, Bluehone AiM VCT2 had total assets of £25.2 million. Bluehone Investors is  paid  an  annual
management  fee of 2 per cent. per annum on the value of the total assets of Bluehone AiM VCT2.  However,  to
facilitate  an  accelerated return for the shareholders following the merger of the Bluehone  VCTs,  Bluehone
Investors has agreed to reduce the management fee to 1.5 per cent. until 30 November 2009.

Small Quoted Companies Sector

In  the year to 31 May 2009, the level of UK markets fell approximately 27 per cent., with the FTSE Small Cap
down 27.6 per cent., the FTSE 100 down 27.2 per cent. and the FTSE All Share down 27.1 per cent. However, the
worst  performing sector of the UK market was the FTSE AIM Index, which declined 49 per cent. over  the  same
period.

The  members of the Vendor Concert Party are of the opinion that the degree of underperformance  of  AIM  has
created  a number of good investment opportunities as company valuations have been impacted more severely  by
the  recent  deterioration  in  the  economic  environment than  can  be  justified.  These  good  investment
opportunities include not only simple good value situations in individual companies but also the creation  of
new  fund  vehicles  to  take advantage of low valuations. Opportunities identified by Bluehone  include  the
development of a strategic product which would acquire influential holdings in public companies and  seek  to
introduce private equity style value driven exit strategies to these companies. Another potential opportunity
identified by Bluehone comprises an income product, which would take advantage of the high cost of capital to
small companies and the continuing difficulty for small companies in securing bank debt finance.

The fall in small company valuations and the FTSE AIM Index in particular has seen the size and scale of many
investment funds fall to levels which the Directors believe will make them subscale and expensive to  manage.
Also,  as  funds become smaller, investors can suffer problems with liquidity. As a result of these  factors,
Bluehone  believes  that  there will be opportunities for consolidation in the small company  funds  sectors.
Bluehone will actively seek to participate in this activity with the objective of being well placed  to  take
advantage of the anticipated recovery in small company markets.

4.      FINANCIAL INFORMATION ON BLUEHONE

Set  out  below is a summary of Bluehone Investors' results for the three years ended 31 March  2009  derived
from the audited consolidated financial statements of Bluehone Investors.

Year ended 31 March                                          2007                2008              2009
                                                             £                   £                 £

Turnover                                                     2,665,686           2,212,470         1,305,792

Profit  for  the  year  before members'  remuneration  and                                       
profit shares                                                2,227,372           1,826,881         862,595

Profit  for the year available for discretionary  division                                       
among members                                                1,614,749           1,375,507         808,147

On  21  May 2009, IWM's year end was changed from 31 May to 31 March to conform to the year ends of  Bluehone
Investors  and Bluehone. Following Completion, Bluehone Investors will remain the principal operating  entity
within the Group. Any surplus income generated by Bluehone Investors will firstly be applied in paying FCAM a
prior  profit  share  calculated as 40 per cent. of the excess revenue over £1m per  annum  (this  figure  is
indexed to the RPI movements since November 2006). Secondly the surplus income will be applied in paying  its
salaried  partners (namely Messrs Brown, Mitchell and Rollason) in fixed profit entitlements, which  will  be
reviewed  annually. Bluehone, as the 100 per cent. equity partner in Bluehone Investors, will be entitled  to
receive  any  remaining  surplus,  on which it will pay corporation tax. Bluehone  will  retain  any  surplus
necessary  to provide additional capital for Bluehone Investors and is expected to distribute any balance  by
way of dividend to IWM.

Further information on the Company's dividend policy is set out in paragraph 15 of this announcement.

5.      PRINCIPAL TERMS OF THE ACQUISITION

Pursuant to the Acquisition Agreement, IWM has agreed to acquire the entire issued share capital of Bluehone
for  a  consideration  of  £1,500,000. The consideration will be satisfied by the issue  of  the  75,000,000
Consideration  Shares to the Vendor Concert Party at a price of 2p per share. The Acquisition  Agreement  is
conditional, inter alia, on the Resolutions being passed at the General Meeting and on certain taxation  and
regulatory  approvals  being  satisfactorily obtained. FSA approval of the change  of  control  of  Bluehone
Investors was received on 10 August 2009.

6.      FUTURE STRATEGY OF THE GROUP

The  Vendor  Concert  Party's strategic objective is to continue to develop Bluehone  Investors  as  a  fund
management business with a focus on both smaller quoted companies and private equity situations. The aim  is
to  continue to manage existing assets, launch new products, acquire assets or mandates and use the benefits
of the PLUS-quoted listing to acquire other fund management businesses.

The  members  of  the  Vendor Concert Party believe that due to the large falls in market  values  of  small
companies over the past year, a number of funds and fund managers may have become sub-scale, particularly in
the  venture  capital trust sector, where they believe that many funds have become too small to justify  the
annual  running costs. The Group intends to participate in the consolidation of this sector, both in respect
of AIM and also, potentially, unquoted funds.

In  line with this strategy, the Company is also announcing today two initiatives which will form the  basis
of the future expansion of the Group and which the Directors believe will provide a platform for growth.

These initiatives are as follows:

Strategic Agreement with Evolve

Conditional on Completion, IWM, Bluehone and Evolve have agreed to enter into a strategic mutual cooperation
agreement.  Pursuant to the Evolve Agreement, IWM will issue the Evolve Consideration Shares  to  Evolve  in
consideration  for the allotment by Evolve of 9,148,037 Evolve Ordinary Shares to IWM. As a result  of  this
transaction,  Evolve will own Ordinary Shares representing approximately 19.9 per cent.  of  IWM's  Enlarged
Ordinary  Share Capital and IWM will own Evolve Ordinary Shares representing approximately 5.1 per cent.  of
Evolve's issued ordinary share capital.

The  Directors  believe  that  the  strategic  cross holding with  Evolve  will  encourage  mutual  business
development  and  enhance the opportunities for each company in their respective areas of  interest  in  the
quoted  company arena. The Directors also believe that the Evolve Agreement provides a basis to  leverage  a
larger skills base in the small companies' arena and could lead to new fund launch and corporate activity.

Evolve  is  quoted  on AIM and owns approximately 54 per cent. of Astaire Group plc, which  is  the  holding
company of a number of regulated financial services businesses, including:

*     Astaire Securities plc - provides research and stockbroking services to institutional investors for UK
      quoted companies, with particular expertise in the Oil and Gas, Mining, Leisure, Telecoms, Technology, 
      Life Sciences, Transport and Support Services sectors and, through its corporate finance business, fund 
      raising and corporate advisory services to quoted companies;

*     Rowan Dartington & Co. Limited - provides private client stockbroking and wealth management services
      through a network of branch offices in the southwest and southeast of England; and

*     Astaire & Partners Limited - provides agency stockbroking and private client investment management for
      a range of international clients.

If  the second tranche of New Ordinary Shares is issued to Elderstreet as described below, IWM will issue an
additional  745,318 New Ordinary Shares to Evolve, to maintain its shareholding in the Company at  19.9  per
cent., in return for the issue to IWM of a further 298,127 shares in Evolve.

Astaire has recently acquired Dowgate Capital plc and Ruegg & Co Limited. Evolve, through its acquisition of
Whim  Gully Capital LLP, has also recently acquired the business and associated assets of St Helen's Capital
Plc, which had previously been PLUS Corporate Adviser to IWM.

Subsequent  to  its acquisition by Evolve, Whim Gully Capital LLP has changed its name to St Helens  Capital
Partners  LLP  and  has assumed the role of PLUS Corporate Adviser to IWM. As a result of  the  conflict  of
interest  created by Evolve's ownership of St Helens Capital and the 19.9 per cent. interest in the  Company
that  Evolve will have at Completion, St Helens Capital will resign as the Company's PLUS Corporate  Adviser
at Completion and an alternative corporate adviser will be appointed in its place.

If  further  Ordinary Shares are issued by IWM in the two years following Completion (a  "New  Issue")  then
Evolve  will have the right to subscribe for further Ordinary Shares at the same price as the New  Issue  in
order  to  maintain its interest in IWM at 19.9 per cent. Pursuant to the Lock In Agreement referred  to  in
paragraph  14  below, Evolve has agreed not to sell any Ordinary Shares during this two-year period.  Evolve
also  has  the  right  to  appoint a non-executive director to the board of  the  Company  and,  subject  to
Completion,  Michael Jackson, a non-executive director of Evolve, has agreed to join the  Board  as  a  non-
executive Director.
 
FSA approval of the proposed investment in IWM by Evolve was received on 10 August 2009.

Investment in Elderstreet
IWM  has  conditionally agreed to acquire an equity interest in Elderstreet Investments Limited.  Under  the
agreement, IWM will initially acquire 196,645 shares in Elderstreet, representing a 9.9 per cent.  interest.
Conditional  on  IWM  satisfying the consideration due, Elderstreet will issue IWM with  a  further  247,979
shares,  which, together with the initial allotment, will represent a total interest of 19.9 per  cent.  The
consideration  for  the acquisition of the shares in Elderstreet is the allotment by IWM  of  6,000,000  New
Ordinary  Shares  to  Elderstreet, representing approximately 5 per cent. of  the  Enlarged  Ordinary  Share
Capital.  Of  the  6,000,000 New Ordinary Shares, IWM will initially allot 2,999,999 shares to  Elderstreet,
representing 2.6 per cent. of the Enlarged Ordinary Share Capital. Conditional on FSA approval being  given,
IWM  will then allot a further 3,000,001 New Ordinary Shares to Elderstreet, representing a further 2.5  per
cent. of the Enlarged Ordinary Share Capital.

The  investment in Elderstreet represents a strategic investment by the Group and will represent  Bluehone's
first direct interest in a private equity focussed investment manager.

Elderstreet  provides funding for management buy-outs and development capital in most industry  sectors  and
has  a  specialist  technology practice investing in the software and computer services  market.  As  at  30
September 2009, Elderstreet had more than £30.0 million under management for both institutional and  private
investors.  The  company  manages  the  Elderstreet VCT plc which has invested  in  management  buyouts  and
development capital investments in both mature and early stage businesses.

The  Directors  believes  that  this  strategic  investment  will  enable  both  businesses  to  develop  in
complementary areas and may also lead to co-marketing of funds and sharing of resources. Michael Jackson  is
also a non- executive director of Elderstreet.

Application has been made to the FSA for approval of the proposed investment in Elderstreet by IWM.

7.      CHANGE OF NAME
To reflect the business focus of the Group following the Acquisition, it is proposed to change the Company's
name to "Bluehone Holdings plc" following Completion.
 
8.      DIRECTORS

Following Completion, the Board will be as follows:

John Wheatley, (Non-executive Chairman) (aged 58)
John  qualified  as  a  Chartered Accountant in 1974 with Peat Marwick Mitchell. After a  three-year  period
working as finance director of a small packaging manufacturer in West Bromwich he returned to the profession
and became a partner in the Midlands Region of KPMG in 1985. He has had extensive experience of working with
private companies in a wide range of industries. He left KPMG at the end of 1998 to set up his own practice.
He  is  chairman  of  Cradley Group Holdings plc which is an AIM listed printing group  based  in  the  West
Midlands.  In  addition he holds a number of other non-executive directorships. The experience and  contacts
that  he  developed  at KPMG makes him particularly well placed to assess acquisition targets  in  the  West
Midlands.

Gordon Harvey, (Non-executive Director) (aged 66)
Gordon  has wide Midlands based connections and also has considerable investment experience. He  is  a  non-
executive  director  of  Bluehone AiM VCT2 plc and an investment consultant with the  stockbroking  firm  of
Williams  de Broë. He became a member of the Birmingham Stock Exchange in 1966 and has continued  to  manage
private  client  portfolios.  In addition to this, he has past experience in bringing  companies  to  public
markets.  He  is  also  Chairman of Margetts Holdings Limited which operates  as  a  successful  Unit  Trust
management  company as well as an Independent Financial Adviser. He is currently President of the Birmingham
and West Midlands Branch of the Securities & Investment Institute.

William (Bill) Brown (Finance Director) (aged 46)
William Brown is a Chartered Accountant and has been advising and investing in small companies for well over
20  years.  He co-founded Bluehone in 2005. Prior to founding Bluehone, Bill was Head of Pan European  Small
Companies at ISIS Asset Management (F&C). He has been actively involved in small quoted companies since 1995
when he launched the AiM Trust.

Robert Mitchell (Executive Director) (aged 43)
Robert Mitchell, a BsC Economics and MBA graduate, began his career at Throgmorton Investment Management  in
1987 initially as a smaller companies analyst and latterly as a fund manager of specialist small cap pension
funds.  When Throgmorton merged with Framlington, Robert took on balanced pension fund remits. Robert joined
F&C  in 1995 to support the launch of the AiM Trust and assist in its management. A member of the Securities
Institute, Robert is lead manager for Bluehone AiM VCT2.

Stuart Rollason (Executive Director) (aged 48)
Stuart  Rollason,  a  qualified  medical doctor, has a history of both medical  practice  and  research  and
analysis.  Following five years of medical practice and six years of medical research at Oxford  University,
Stuart  changed  career  direction  and  joined  Beeson  Gregory  as  a  research  analyst  specialising  in
biotechnology,  pharmaceuticals  and  healthcare. Subsequent similar roles  at  WestLB  Panmure  and  Nomura
International  led  to  Stuart's appointment at FCAM where he went on to manage the  ISIS  UK  Institutional
Smaller  Companies  Fund and UK Small cap sub-fund of a pooled pension fund. Stuart's current  focus  is  on
investing in small caps for Active Capital Trust.

Michael Jackson (Non-executive Director) (aged 58)
Michael  Jackson has specialised in raising finance and investing in the smaller companies  sector  for  the
past  20  years.  He  qualified as a Chartered Accountant with Coopers & Lybrand and spent  23  years  as  a
director  of  Sage  plc. During that time Sage's capitalisation rose from approximately £1  million  to  its
current level of over £2 billion. Michael is founder and chairman of Elderstreet Investments Limited,  which
is  best  known  for  its investment in young, ambitious technology businesses. Michael is  a  director  and
personal  investor  in  many other quoted and unquoted companies, many of which have been  involved  in  the
technology sector.

9.      THE VENDOR CONCERT PARTY

The  Vendor Concert Party comprises William Donald Brown, Robert James Grenville Mitchell and Stuart Bernard
Rollason,  all of whom are directors and shareholders of Bluehone. Additional information about the  members
of the Vendor Concert Party is set out in paragraph 8 above and in the Circular.

10.     THE CITY CODE

Under  Rule 9 of the City Code, when any person acquires, whether by a series of transactions over a  period
of  time  or not, an interest in shares (as defined in the City Code) which (taken together with  shares  in
which  he  and persons acting in concert with him are interested) carry 30 per cent. or more of  the  voting
rights of a company subject to the City Code that person is normally required to make a general offer to all
of the company's shareholders to acquire the remaining shares in that company not held by him.

Similarly, when any person, together with persons acting in concert with him, is interested in shares  which
in  aggregate carry not less than 30 per cent. of the voting rights of a company, but does not  hold  shares
carrying  more  than 50 per cent. of the voting rights of the company, a general offer is  required  if  any
further interest in shares is acquired by any such person, or persons acting in concert with him.

An  offer  under  Rule 9 must be in cash and at the highest price paid by the person required  to  make  the
offer,  or  any person acting in concert with him, for any interest in shares acquired during the 12  months
prior to the announcement of the offer.

In  connection  with the Acquisition, the members of the Vendor Concert Party, whose details  are  given  in
paragraph  9  above, are treated as being persons acting in concert for the purposes of  the  City  Code  in
relation to the Company. The Waiver Resolution to be proposed at the General Meeting, which will be taken on
a  poll  of  Independent Shareholders, deals with the grant to the Vendor Concert Party by the  Panel  of  a
conditional waiver of Rule 9 of the City Code, relating to the issue of New Ordinary Shares to them pursuant
to the Acquisition (the "Waiver").

As  at  the  date  of this announcement, neither Bluehone nor the Vendor Concert Party has any  interest  in
Ordinary  Shares. Assuming that the Acquisition is completed, the Vendor Concert Party's maximum holding  in
the  Company following the Proposals will be 75,000,000 Ordinary Shares representing approximately 65.3  per
cent.  of  the  Enlarged  Ordinary  Share Capital. A table showing the respective  individual  interests  in
Ordinary Shares of the members of the Vendor Concert Party on completion of the Proposals is set out below:
                                                             Number of New           Percentage of Enlarged
                                              Ordinary Shares to be issued           Ordinary Share Capital
                                               pursuant to the Acquisition                   on Completion*
William Brown                                                   31,875,000                       27.74
Robert Mitchell                                                 31,875,000                       27.74
Stuart Rollason                                                 11,250,000                        9.79
Vendor Concert Party total                                      75,000,000                       65.26


*assuming that only the initial tranche of New Ordinary Shares is allotted to Elderstreet.
 
Following completion of the Acquisition, no individual member of the Vendor Concert Party will be interested
in  Ordinary  Shares  carrying more than 30 per cent. of the Company's voting share  capital.  However,  the
members  of  the Vendor Concert Party will between them hold more than 50 per cent. of the Company's  voting
share capital and (for so long as they continue to be treated as acting in concert) may accordingly be  able
to  increase  their aggregate shareholding without incurring a further obligation under Rule 9 of  the  City
Code  to  make a general offer, although individual members of the Vendor Concert Party will not be able  to
increase their percentage shareholding through the Rule 9 threshold without Panel consent.

The  Panel  has agreed, subject to Resolution 2 being passed by independent Shareholders on a  poll  at  the
General Meeting, to waive the obligation on the Vendor Concert Party under Rule 9 of the City Code to make a
general  offer for the entire issued share capital of the Company which would otherwise arise on  completion
of the Acquisition.

Shareholders  will  therefore be asked to vote on a resolution to approve a  waiver  by  the  Panel  of  any
obligation on the part of the Vendor Concert Party to make a general offer to Shareholders under Rule  9  of
the City Code arising from the issue to the Vendor Concert Party of the Consideration Shares pursuant to the
Acquisition.

Accordingly,  Resolution  2  is being proposed at the General Meeting, and  will  be  taken  on  a  poll  of
Shareholders.
 
11.     ISSUE OF NEW ORDINARY SHARES TO EXISTING DIRECTORS
 
John  Wheatley  and  Gordon  Harvey  (the  Existing Directors) and CF  Secretaries  Limited  (IWM's  Company
Secretary)  have each waived their entitlement to fees since the Company's incorporation. In recognition  of
this, it is proposed that 500,000 New Ordinary Shares be issued to each of John Wheatley, Gordon Harvey  and
CF Secretaries Limited on Completion.
 
12.     RE-ADMISSION TO PLUS
The  Company has applied for the Enlarged Ordinary Share Capital to be re-admitted to PLUS, subject  to  the
Resolutions  being passed by Shareholders at the General Meeting. If the Resolutions are  duly  passed,  the
Directors expect that Admission will take place on or around 11 November 2009.

The  New  Ordinary  Shares will, on Admission, rank pari passu in all respects with  the  Existing  Ordinary
Shares  in  issue  immediately  following Admission and will rank  in  full  for  all  dividends  and  other
distributions hereafter declared, paid or made on the ordinary share capital of the Company.

13.     NEW ARTICLES OF ASSOCIATION
It is proposed that, on Completion, the Company will adopt the New Articles, a summary of which can be found
in the Circular.
 
14.     LOCK IN AGREEMENTS
On  Admission, the Directors will, in aggregate, be interested in 77,000,000 Ordinary Shares and Evolve will
be interested in 22,870,093 Ordinary Shares, representing approximately 67.0 per cent. and 19.9 per cent. of
the Enlarged Ordinary Share Capital respectively.

Conditional on Admission and save as set out or referred to below, the Directors and Evolve have agreed with
the Company and St Helens Capital not to dispose of any interest in such Ordinary Shares held by them for  a
period of 12 months and 24 months respectively following Admission.

The  provisions of the above lock in agreements (the "Lock In Agreements") will not apply in certain limited
circumstances which include, inter alia:

*       the  acceptance of (or granting of an irrevocable undertaking in respect of) a general offer for the
        whole or part of the issued equity share capital in accordance with the City Code where such disposal or
        agreement to dispose is either conditional upon the announcement of such offer or is by way of acceptance of
        such offer or the giving of an irrevocable undertaking to accept such an offer; or

*       pursuant to a compromise or arrangement between the Company and its creditors; or

*       for the purpose only of effecting the appointment of a trustee or new trustee of a family settlement
        for the benefit of members of the immediate family of a locked-in shareholder; or

*       by the personal representatives of a locked-in shareholder if he should die; or

*       pursuant to a court order; or

*       where St Helens Capital consents to a transfer or sale.

15.     DIVIDEND POLICY
The  Company  has  not  in  the past, paid any dividends. The Directors intend to commence  the  payment  of
dividends  when it becomes commercially prudent to do so, having regard to the availability of distributable
profits and the need to retain funds to finance the Company's future growth.
  
  
16.     ENTERPRISE INVESTMENT SCHEME AND VENTURE CAPITAL TRUSTS
The  Company has received notification from HMRC that the Ordinary Shares will rank as "eligible shares" for
the  purpose  of  the EIS and are capable of being a "qualifying holding" for the purpose of  investment  by
VCTs.  Neither  the  Company,  the  Directors nor any of the Company's  advisers  gives  any  warranties  or
undertakings that EIS relief will not be withdrawn at a later date.
  
17.     CREST AND SHARE CERTIFICATES

CREST is a paperless settlement system enabling securities to be evidenced otherwise than by certificate and
transferred otherwise than by written instrument in accordance with the CREST Regulations. The Articles  and
the New Articles permit the Company to issue shares in uncertificated form and the Company's Ordinary Shares
have been admitted to CREST.

Accordingly,  settlement of transactions in Ordinary Shares following Admission may take  place  within  the
CREST  system, should shareholders so wish. CREST is a voluntary system and shareholders who wish to receive
and  retain share certificates will be able to do so. All the Ordinary Shares will be in registered form and
no temporary documents of title will be issued.

Shareholders' existing share certificates will remain valid if the change of name is approved at the General
Meeting and new certificates will not be issued.
  
18.     SHARE OPTION SCHEME
In order to incentivise the management and key employees of the Group, the Directors intend to adopt a share
option scheme at an appropriate time following Admission.

19.     CORPORATE GOVERNANCE

The  Directors intend to comply with the provisions of the Guidance for Smaller Companies published  by  the
Quoted  Companies Alliance to the extent that they believe is appropriate in view of the size and  resources
of  the Company. Following Completion, due to the size of the Company, audit and risk management issues will
be  addressed by the Directors as a whole, rather than by separate committees. As the Company develops,  the
Board  will consider establishing separate audit and risk management committees and will consider developing
further policies and procedures which reflect the principles of good governance.

The  Company has adopted, and will operate where applicable, a share dealing code for directors  and  senior
executives under the same terms as the Model Code on directors' dealings in securities, published from  time
to time by the UK Listing Authority.

20.     GENERAL MEETING

The  General  Meeting  is  being convened for 11.00 a.m. on 9 November 2009. At  the  General  Meeting,  the
following resolutions will be proposed:

Ordinary Resolutions:
*       Resolution 1: to approve the Acquisition Agreement;
*       Resolution 2: to approve the Waiver;
*       Resolution  3:  to increase the Company's  authorised share capital from £4,000,000 to £25,000,000  by
        the creation of 1,050,000,000 new ordinary shares of 2p each in the Company;
*       Resolution  4:  to authorise the Directors to allot the New Ordinary Shares in connection  with  the
        Proposals and otherwise;

*       Resolution 5: to approve the Evolve Agreement;

Special Resolutions:
*       Resolution 6: to adopt the New Articles;
*       Resolution 7: to disapply pre-emption rights;
*       Resolution 8: to change the name of the Company to "Bluehone Holdings plc"; and
*       Resolution  9: to amend the Company's Memorandum of Association to reflect the change of name  of  the
        Company.

21.        CIRCULAR TO SHAREHOLDERS

The  Company  is  today posting a circular to Shareholders explaining the background to and  reasons  for  the
Proposals  and explaining why the Existing Directors consider them to be in the best interests of the  Company
and  Shareholders  as a whole and to seek Shareholders' approval for the Resolutions to  be  proposed  at  the
General Meeting.

22.     EXPECTED TIMETABLE

Circular posted to Shareholders                                                               15 October  2009
Latest time and date for receipt of Forms of Proxy                               11.00 a.m. on 7 November 2009
IWM General Meeting                                                              11.00 a.m. on 9 November 2009
Dealings expected to commence on PLUS                                                         11 November 2009
New Ordinary Shares credited to CREST (where applicable)                                      11 November 2009
Dispatch of share certificates (where applicable)                                          By 18 November 2009



 DEFINITIONS

The following definitions apply throughout this announcement, unless the context requires otherwise:

"2005 Admission Document"               the  Company's admission document published on the Company's admission
                                        to the PLUS-quoted Market on 27 September 2005

"Active Capital"                        Active Capital Trust plc

"Acquisition"                           the  proposed  acquisition by IWM of the entire  issued  and  unissued
                                        share  capital  of  Bluehone  in accordance  with  the  terms  of  the
                                        Acquisition Agreement

"Acquisition Agreement"                 the  agreement dated 15 October 2009 between IWM and the  shareholders
                                        of Bluehone under which IWM has agreed, subject to certain conditions,
                                        to acquire the entire issued share capital of Bluehone

"Admission" or "Re-Admission"           admission  of  the Enlarged Ordinary Share Capital to trading  on  the
                                        PLUS-quoted Market

"AIM"                                   the AIM market of the London Stock Exchange

"Articles"                              the existing Articles of Association of the Company

"Bluehone"                              Bluehone  Limited, a company incorporated in England  and  Wales  with
                                        registered number 5194420

"Bluehone Investors"                    Bluehone  Investors  LLP, a limited liability partnership  established
                                        under the Limited Liability Partnerships Act 2000

"Bluehone VCTs"                         Bluehone AiM VCT plc and Bluehone AiM VCT2 plc

"Board"                                 the board of Directors of the Company as constituted from time to time

"Circular"                              the circular to Shareholders dated 15 October 2009

"City Code"                             the City Code on Takeovers and Mergers

"CLB Coopers"                           CLB Coopers, Chartered Accountants, advisors to the Board under Rule 3
                                        of the City Code

"Company" or "IWM"                      Investments  West Midlands Plc, a company incorporated in England  and
                                        Wales with registered number 05455923

"Completion"                            completion of the Acquisition, which is expected to take place  on  11
                                        November 2009

"Consideration Shares"                  the  75,000,000 New Ordinary Shares to be issued to the Vendor Concert
                                        Party at Completion

"CREST"                                 the  Relevant  System  (as  defined  in  the  CREST  Regulations)  for
                                        paperless  settlement of share transfers and the holding of shares  in
                                        uncertified  form  which  is administered by Euroclear  UK  &  Ireland
                                        Limited

"Directors"                             the Existing Directors and the Proposed Directors

"EIS"                                   the  Enterprise Investment Scheme and related reliefs as  detailed  in
                                        Part  5  of the Income Tax Act 2007 and in sections 150A to  150D  and
                                        Schedule  5B and 5BA of the Taxation of Chargeable Gains Act 1992  (as
                                        amended)

"Elderstreet"                           Elderstreet Investments Limited, a company incorporated in England and
                                        Wales with registered number 01825358

"Enlarged Ordinary Share Capital"       the  Ordinary Shares in issue immediately following completion of  the
                                        Proposals

"Evolve"                                Evolve  Capital Plc, a company incorporated in England and Wales  with
                                        registered number 06383902

"Evolve Agreement"                      the agreement dated 15 October 2009 between IWM and Evolve pursuant to
                                        which  IWM  and Evolve have agreed, subject to certain conditions,  to
                                        acquire shares in each other

"Evolve Consideration Shares"           the  22,870,093  New  Ordinary  Shares  to  be  issued  to  Evolve  at
                                        Completion

"Evolve Ordinary Shares"                ordinary shares of 1p each in Evolve

"Existing Directors"                    the directors of the Company at the date of this announcement

"Existing Ordinary Shares"              the  12,555,000  Ordinary Shares in issue  as  at  the  date  of  this
                                        announcement

"FCAM"                                  F&C Asset Management Plc

"FSA"                                   the Financial Services Authority

"FTSE 100 Index"                        the  index  tracking  the 100 companies listed  on  the  London  Stock
                                        Exchange which have the highest market capitalisation and satisfy  the
                                        relevant qualifying criteria

"FTSE AIM Index"                        the  index  consisting of all companies traded on AIM which  meet  the
                                        index's requirements for liquidity and free float

"FTSE All Share Index"                  the  capitalisation-weighted index, comprising around 800 of more than
                                        2,000 companies traded on the London Stock Exchange

"FTSE Small Cap Index"                  the index comprising companies outside the FTSE 350 Index (which index
                                        includes the 350 largest companies in the UK)

"General Meeting"                       the General Meeting of the Company to be held on 9 November 2009

"Group"                                 the Company, Bluehone and Bluehone Investors

"HMRC"                                  HM Revenue and Customs

"London Stock Exchange"                 the London Stock Exchange PLC

"New Articles"                          the  proposed new Articles of Association of the Company to be adopted
                                        at the General Meeting

"New Ordinary Shares"                   the new Ordinary Shares to be issued pursuant to the Proposals

"Official List"                         the Official List of the UK Listing Authority

"Ordinary Shares"                       ordinary shares of 2p each in the capital of the Company

"Panel"                                 the Panel on Takeovers and Mergers

"PLUS Markets"                          PLUS  Markets plc, a recognised investment exchange under section  290
                                        of the FSMA, which is a subsidiary of PLUS Markets Group plc

"PLUS-quoted Market" or "PLUS"          the primary market for unlisted securities operated by PLUS Markets

"PLUS Rules"                            the  PLUS  Rules for Issuers, which set out the admission requirements
                                        and continuing obligations of companies seeking admission to and whose
                                        shares have been admitted to trading on PLUS

"Proposals"                             the Acquisition, the Waiver, the Evolve Agreement, the change of name,
                                        the adoption of the New Articles and Admission

"Proposed Directors"                    William Brown, Robert Mitchell, Stuart Rollason and Michael Jackson

"Resolutions"                           the  Resolutions to be proposed at the General Meeting which  are  set
                                        out in the Notice of General Meeting

"Shareholders"                          persons registered as the holders of any part of the share capital  of
                                        the Company

"St Helens Capital"                     St Helens Capital Partners LLP, PLUS Corporate Adviser to the Company,
                                        which is authorised and regulated by the FSA

"UK"                                    the United Kingdom of Great Britain and Northern Ireland

"Vendor Concert Party"                  William  Brown,  Robert  Mitchell and Stuart Rollason,  all  of  48/54
                                        Moorgate, London EC2R 6EJ

"Venture Capital Trust" or "VCT"        a  Venture Capital Trust for the purposes of Part 6 of the Income  Tax
                                        Act 2007

"Waiver"                                the  waiver (further details of which are set out in paragraph  10  of
                                        this  announcement) of the obligation on the Vendor Concert  Party  to
                                        make  a  general  offer  under Rule 9 of the  City  Code  which  would
                                        otherwise  arise as a consequence of the issue to the  Vendor  Concert
                                        Party  of  the  Consideration  Shares  pursuant  to  the  Acquisition,
                                        conditional  upon the approval of Shareholders by the passing  of  the
                                        Waiver Resolution

"Waiver Resolution"                     Resolution 2 set out in the Notice of General Meeting



The Directors of Investments West Midlands Plc are responsible for the contents of this announcement.



Contact Information

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