Strategy/Company/Operations Update

NEW CENTURY AIM VCT PLC

New Century AIM VCT plc
Legal Entity Identifier: 213800DEURQTGUXXPY18

On 12 August 2022, the Board of New Century AIM VCT plc (the "Company") published a circular to Shareholders (the "Circular") in relation to the recommended proposal for a managed wind-down of the Company and the associated amendment of the Company's Investment Policy (the "Proposal").

The Circular includes notice of a general meeting which will be held at Brownheath Park, Gregory Lane, Durley SO32 2BS at 11.00 a.m. on 5 September 2022 (the "General Meeting"). A resolution will be put to Shareholders to seek their approval of the New Investment Policy at the General Meeting.

Copies of the Circular, together with a Form of Proxy for use in connection with the General Meeting, were posted to Shareholders on 12 August 2022. Regardless of whether Shareholders intend to attend the General Meeting, they are requested to complete and return the Form of Proxy as soon as possible, in accordance with the instructions printed on it.

A copy of the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Defined terms used in this announcement have the meanings given in the Circular unless the context otherwise requires.

Background to and reasons for the Proposal

At the 2021 AGM, an ordinary resolution to approve that the Company continue being a venture capital trust was put to Shareholders in accordance with article 163 of the Company's Articles of Association.

Shareholders voted overwhelmingly against this resolution at the 2021 AGM and, in accordance with the Company's Articles of Association, the Board convened the EGM at which the Winding-up Resolution was put to Shareholders. The incumbent Board was divided as to whether the passing of the Winding-up Resolution was in the best interests of the Company and Shareholders as a whole, and was therefore unable to make a unanimous recommendation in respect of the Winding-up Resolution. The Winding-up Resolution narrowly failed to be passed with approximately 72 per cent. of votes cast being in favour of it, being just short of the 75 per cent. threshold required for the resolution to be passed. Subsequent to the EGM, all the directors who recommended voting against the passing of the Winding-up Resolution have left the Board.

Your Board is of the opinion that, notwithstanding the fact that the Winding-up Resolution failed to pass, the vast majority of the Company's Shareholders wish for the Company to cease being a venture capital trust and for the Board to return the Company's capital to Shareholders. Accordingly, your Board has undertaken a strategic review to determine the best means of returning capital to Shareholders, which included consideration of proposing a second resolution to wind-up the Company to Shareholders. Your Board has also considered, alongside its principal advisers, the secondary market for the sale of the majority of the Company's assets as well as the relevant provisions of the VCT Rules. Following the completion of that strategic review, your Board has concluded that a well-managed sales process over the short to medium term will be the most effective means of realising the Company's investments and returning capital to Shareholders at a value which reflects the Company's NAV.

With a view to maximising Shareholder value, the Board has determined that the Company should be put into Managed Wind-Down, with cash returned to Shareholders in a timely and efficient manner, and in a way that protects the upfront VCT tax relief received by Shareholders. The Board believes that proposing a second resolution to wind-up the Company at this time would not be as effective in maximising returns to Shareholders. In implementing the Managed Wind-Down, the Company will benefit from having its Portfolio realised by the Investment Manager who the Board believes will be able to realise the Portfolio in such a way as to maximise returns for Shareholders over the next 12 months. Your Board believes this to be the case given that the Investment Manager has acted in this capacity for many years and has an in-depth knowledge of the investments that comprise the Company's Portfolio, and is thus in a strong position to appraise the perceived valuation of such investments. Your Board believes the Investment Manager is also familiar with the marketability of those investments and is well placed to judge the best exit route for them, whether it be through brokers, market makers or in-house buyers.

If the Resolution is passed, your Board intends to serve notice on the Investment Manager which will result in the Investment Manager being removed from office upon the expiry of its 12 month notice period. Once the Investment Manager is removed from office, the Company will no longer have to pay the Investment Manager's fee, which will result in reduced ongoing charges and will increase the overall returns to Shareholders. However, your Board anticipates that it will take more than 12 months to fully realise the Company's Portfolio from the time the Managed Wind-Down is approved and, as such, your Board will contemporaneously make an application to the FCA to have the Company registered as a small registered alternative investment manager ("AIFM"). This will allow your Board to take over the Managed Wind-Down and the realisation of the Company's remaining assets upon the expiry of the Investment Manager's notice period. Your Directors are confident they will be able to realise the majority of the Company's residual assets upon their taking charge of the Managed Wind-Down and will do so whilst continuing to not receive any directors' fees from the Company.

Once the Board is satisfied that the majority of the Portfolio has been realised, and subject to Shareholder approval, the Company will be put into members' voluntary liquidation and wound-up. In order to implement the Managed Wind-Down, the Company is seeking Shareholder approval, by means of an ordinary resolution, to replace the Investment Policy with the New Investment Policy set out in Part 2 of the Circular. If approved, the Board will endeavour to realise all of the Company’s investments in a manner that achieves a balance between maximising the net value received from those investments and making timely returns to Shareholders.

Dividends

Should the Resolution be passed and the Managed Wind-Down process initiated, the payment, quantum and timing of any dividends paid during the Managed Wind-Down process will be at the sole discretion of the Board, and will be dependent on the sale of the assets, ongoing income streams generated by the assets held and the Company’s ongoing cash requirements. The amount of the net proceeds that can be paid as dividends and the timing of any distributions will also be determined by the distributable reserves of the Company and the need to comply with the VCT Rules as they stand currently, and in the future. There can be no guarantee as to the payment, quantum or timing of dividends during the Managed Wind-Down process.

Should the Resolution not be passed and the Managed Wind-Down proposal therefore rejected, the Board will keep the payment of annual dividends under review and, subject to ongoing income streams generated by the assets held, the Company’s distributable reserves position and the Company’s ongoing cash requirements, will seek to pay these for as long as possible.

Indicative returns for Shareholders

The audit carried out by UHY Hacker Young LLP ("UHY") in respect of the Company's 2022 Accounts resulted in UHY concluding that 2022 Accounts gave a true and fair view of the state of the Company's affairs as at 28 February 2022. However, Shareholders should note that the valuations upon which the 2022 Accounts are based are themselves based on certain assumptions and whether the assets can be sold in accordance with these valuations, or indeed at all, depends on market conditions at the time of sale. Whilst the Board believes the majority of assumptions relating to the audit hold true as at the date of the Circular, there are some material changes that will affect these valuations, including the Government’s reversal of the planned cuts in the rate of corporation tax over the longer term, which will negatively impact on future distributable profits and cash flows from the Company’s underlying investments, as well as current recessionary trends in the global macro-economic outlook, increasing inflation and higher interest rates. Whilst the Board believes market conditions over the short to medium term will prove suitable as regards the sale of the Company’s assets, there is no guarantee such conditions will not change over the short-to-medium, or longer, term and the market value of, and returns from, the assets cannot be guaranteed. Many shareholders will be aware of the recent weakness of the UK equity market and, in particular, the AIM market. Consideration will be given to the prevailing market conditions when implementing the Managed Wind-Down and your Board will hold off selling assets if it feels that market conditions are unfavourable.

In seeking to realise the Company’s investments in an orderly manner, the Directors will take into account the continued costs of operating the Company and the impact of the reducing NAV on ad valorem adviser fees. The capacity to trade in the Ordinary Shares will be maintained for as long as the Directors believe it to be practicable and cost-effective during the Managed Wind-Down period and the Board will seek to minimise costs wherever it is reasonable to do so.

Amendments to the Investment Policy

The Proposal involves amending the Company’s Investment Policy to reflect a realisation strategy and the Company ceasing to make any new investments. The proposed amendments to the Company’s Investment Policy are considered a material change and therefore the consent of Shareholders to the proposed amendments is being sought.

The Directors believe that being prescriptive as regards the timeframe for realising the Company’s investments could prove detrimental to the value achieved on realisation. Therefore, it is the Board’s view that the strategy for the realisation of the Company’s investments will need to be flexible and may need to be altered to reflect changes in the circumstances of a particular investment or in the prevailing market conditions.

Once all, or substantially all, of the Company’s investments have been realised and distributions in respect thereof made, the Company will, at an appropriate time, seek Shareholders’ approval for the Company to be placed into members’ voluntary liquidation.

Part 2 of the Circular sets out the proposed New Investment Policy in full.

Benefits of the Proposal

The Directors believe that the Proposal is in the best interests of Shareholders as a whole and should yield the following principal benefits:

implementing a managed and orderly disposal of investments should maximise the value to be realised on the sale of the Company’s assets and, therefore, returns to Shareholders;
the Proposal will allow cash to be returned to Shareholders in a cost-effective and timely manner; and
the Proposal will preserve the upfront tax relief for Shareholders.

Accordingly, the Directors are recommending that Shareholders vote in favour of the Proposal.

Resolution

The Proposal is subject to the approval of Shareholders. Notice of a General Meeting at which the Resolution to approve the Proposal will be considered is set out on pages 12 to 15 of the Circular.

The Resolution, which will be proposed as an ordinary resolution, seeks authority to adopt the New Investment Policy. As an ordinary resolution, for the Resolution to pass, more than 50 per cent. of the votes cast must be voted in favour.

General Meeting

The General Meeting has been convened for 11.00 a.m. on 5 September 2022 to be held at Brownheath Park, Gregory Lane, Durley SO32 2BS. The Resolution will be voted on by way of a poll. In accordance with the Articles, all Shareholders entitled to vote and who are present in person or by proxy at the General Meeting shall upon that poll have one vote in respect of every Ordinary Share held.

Shareholders are strongly encouraged to appoint the Chairman of the General Meeting as their proxy to vote on their behalf at the General Meeting. This should ensure that your votes are registered.

The Board encourages the submission of questions on the content of the Circular to the Board via email to CompanySecretarial@uk.tricorglobal.com by 5.00 p.m. on 1 September 2022.

Expected timetable

	2022
Date Forms of Proxy must be returned by	11.00 a.m. on 1 September 2022
General Meeting	11.00 a.m. on 5 September 2022
Notes
1. The times and dates set out in the expected timetable above and mentioned throughout the Circular may be adjusted by the Company, in which event details of the new times and/or dates will be notified, as required, to the FCA and the London Stock Exchange and, where appropriate, to Shareholders and an announcement will be made through a Regulatory Information Service.
2. All references to times in the Circular are to London time, unless otherwise stated.