NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

16 May 2023

VPC Specialty Lending Investments PLC

Publication of a Circular containing a Notice of General Meeting

Further to its announcement of 22 December 2022, VPC Specialty Lending Investments PLC ("VSL" or the "Company") has today published a circular (the "Circular") which will shortly be sent to shareholders.

The Circular sets out details regarding the proposed amendments:

·      to the Company's investment policy (the "Investment Policy") with a view to realising the Company's assets in an orderly manner that achieves a balance between maximising the value received from investments and making timely returns of cash to the Company's shareholders; and

·      to the investment management agreement between the Company and Victory Park Capital Advisors, LLC (the "Investment Manager") as a consequence of the modification of the Company's Investment Policy so as to better align the interests of the shareholders and the Investment Manager.

Under the Listing Rules, the Investment Manager is deemed a related party of the Company (in accordance with LR 15.5.4R) and the proposed amendments to the Investment Management Agreement constitute a related party transaction requiring the approval of the Independent Shareholders before they may be implemented.

As previously outlined in the Company's announcement of 22 December 2022, the Board determined that it would be in the best interests of the Company and Shareholders to put forward formal proposals to Shareholders for a managed wind-down of the Company instead of the 25% Exit Opportunity. In addition, the Board is pleased to confirm that it has also agreed with the Investment Manager to amend the existing management fee and performance fee arrangements, further details can be found below. The Board believes that these are material improvements over the existing arrangements in the context of a managed wind-down.

The Circular contains a notice convening a general meeting (the "GM") of the Company at which approval will be  sought from shareholders for the proposed amendments to the Investment Policy and from Independent Shareholders in respect of proposed amendments to the investment management agreement. The GM will be held at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH at 2.00 p.m on 12 June.

A copy of the Circular will shortly be made available on the Company's website at https://vpcspecialtylending.com/, and submitted to the National Storage Mechanism, where it will be available for inspection at:  https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Capitalised terms that are used but not defined in this announcement shall have the meanings ascribed to them in the Circular.

Enquiries

Extracts from the Circular

(References to pages or paragraphs and appendices below refer to the relevant pages, paragraphs or appendices of the Circular and references to 'this Circular' refer to the Circular).

2              Background to the Proposals

Although the Company has demonstrated strong NAV total return performance over the longer term (-6.97%, 39.49% and 57.60% over one year, three years and five years, respectively, to 31 December 2022), the discount to NAV per Share at which the Shares trade has been both wide and persistent despite measures taken by the Board to seek to address this through the use of buybacks.

Consequently, and as set out in the Company's announcement on 22 December 2022, the Board had for some time been reviewing options for reducing the continuing deep discount of the Company's Share price to NAV per Share and had taken professional advice and consulted certain major Shareholders of the Company.

Given the average discount of the Company's Share price to NAV per Share over the 3 month period ended 31 March 2023 was 17.5%, being greater than 5% this would have required the Company to propose the 25% Exit Opportunity following the 2023 AGM, in keeping with the commitment it made to Shareholders in 2020. However, the Board also explained in the Company's announcement on 22 December 2022 that it does not believe that the 25% Exit Opportunity alone would have a lasting impact on the discount of the Company's Share price to NAV per Share and that the 25% Exit Opportunity might in fact have a potentially detrimental impact for Shareholders. This is because the Company would shrink in size, resulting in the Shares potentially becoming less liquid and the ratio of fees and other costs increasing as a proportion of NAV.

Rather than shrink the size of the Company and potentially decrease liquidity through the 25% Exit Opportunity, the Board has determined that a preferable course of action would be to provide an exit opportunity to  Shareholders which improves on the 25% Exit Opportunity and should generate greater value for Shareholders. The Board believes that it would be in the best interests of the Company and Shareholders as a whole to put forward a proposal for a managed wind-down of the Company, which would provide a full managed exit for all Shareholders (as opposed to just a partial one, which would have been the case under the 25% Exit Opportunity).

This Circular therefore sets out the Proposals in detail. In order to implement the Proposals:

(a)   Shareholders need to approve revisions to the investment policy of the Company so that the Company's assets can be realised in an orderly manner in order to provide a managed exit over time for all Shareholders; and

(b)   Independent Shareholders need to approve the proposed amendment to the terms of the Investment Management Agreement between the Company and the Investment Manager in order to reflect the modification of the Company's investment objective and policy and to better align the interests of the  Shareholders and the Investment Manager.

As the Proposals require the approval of Shareholders, a formal notice convening the General Meeting is set out at the end of this Circular.

The Board and the Investment Manager believe that a carefully managed process of divesting assets should, over the remaining life of the Company, remove the discount of the Share price to NAV per Share and as such should provide a reasonable return to Shareholders. In the Board's view there is insufficient Shareholder support for an alternative.

3              The Proposals

3.1          Amendment to the investment objective and investment policy of the Company

The Company proposes to amend its investment objective and investment policy as set out below. For information, the Company's existing investment objective and existing investment policy are set out in Part 3 of this Circular.

The Board is proposing that the Company's investment objective be restated as follows:

"To conduct an orderly realisation of the assets of the Company, to be effected in a manner that seeks to achieve a balance between returning cash to Shareholders promptly and maximising value."

Revised investment policy

The Board and the Investment Manager believe that the Company's portfolio will require careful investment management in order to achieve the Company's proposed new investment objective.

If Resolution 1 is passed, the Company's existing investment policy will be replaced and the Company will adopt and adhere to the following amended and restated investment policy for so long as the Company maintains its listing and is subject to the Listing Rules:

"The Company's investments will be realised in an orderly manner, that is, with a view to achieving a balance between returning cash to Shareholders promptly and maximising value.

From the date of this Circular until 30 June 2023, the Company may make new investments directly (in aggregate) up to 5 per cent. of its Gross Assets (at the time of the investment) in consumer loans, SME loans, advances against corporate trade receivables and/or purchases of corporate trade receivables originated by portfolio companies ("Debt Instruments").

Following this period, the Company may not make any new investments save that: (a) investments may be made to honour existing documented contractual commitments to existing portfolio companies as a majority of the Company's investments are delayed draw term loans; (b) further investment may be made into the Company's existing investments without redemption rights in order to preserve the value of such investments; and (c) realised cash may be invested in cash or cash equivalents, government or public securities (as defined in the rules of the UK Financial Conduct Authority), money market instruments, bonds, commercial paper or other debt obligations with banks or other counterparties having a "single A" (or equivalent) or higher credit rating as determined by any internationally recognized rating agency selected by the directors of the Company (which may or may not be registered in the European Union) ("Cash Instruments") pending its return to Shareholders in accordance with the Company's investment objective.

Any return of proceeds to the Shareholders will be subject to compliance with existing gearing facilities and hedging arrangements, payment of expenses and reserves for potential liabilities.

The Company will continue to comply with the restrictions imposed by the Listing Rules."

Any material change to the revised investment policy would require Shareholder approval by an ordinary resolution in accordance with the Listing Rules.

The revised investment policy will involve a continuing evaluation of the portfolio in order to assess the most appropriate realisation strategy to be pursued in relation to each investment. Whilst some investments may be considered appropriate for sale in the shorter term, other investments may be held for a longer period with a view to enabling their inherent value to be realised successfully.

The Company's credit investments are typically structured as delayed draw term loans with credit enhancement in the form of (a) first loss equity subordination, (b) extensive covenant packages, and (c) extensive monitoring and data requirements. Portfolio companies generally contribute to the equity tranche which is in first loss position which aligns incentives with equity investors and management. Borrowers draw capital over time based on their needs, subject to availability under their borrowing base, covenant compliance and performance of the underlying collateral, among other conditions. The Company lends against a narrowly defined collateral pool, with eligibility tested on an ongoing basis in order to reduce the probability of loss or collateral deterioration. Collateral is tested and monitored regularly to ensure stability in the underlying collateral support.

The strategy for realising individual investments will be flexible and may need to be altered to reflect changes in the circumstances of a particular investment or in the prevailing market conditions. The Board will meet regularly to review progress in implementing the Company's revised investment objective and policy and the then current position of unrealised holdings.

The Board and the Investment Manager regard the orderly realisation of the Company's assets as the best strategic option at the present time. However, should Shareholders reject the proposed amendment to the investment policy to facilitate a managed wind-down of the Company, the Board and the Investment Manager will continue to fulfil the existing investment objective and policy and work to identify other options for the future of the Company.

To be overly prescriptive on the timeframe could prove detrimental to the realisation process. Sensitive, however, to the on-going costs of running the portfolio, the Investment Manager will aim to realise the portfolio in an orderly manner that achieves a balance between returning cash to Shareholders promptly and maximising value.

The weighted average remaining life of the Company's debt investments is 14 months as of 31 March 2023, however, given the illiquid nature of the Company's investments, it is very difficult to provide any certainty on the timeframe for realisation. The Board is aware that Shareholders will expect some guidance on the expected timeframe and, although Shareholders should place only limited reliance on this information, it is the Board's current estimate that the first distribution would occur at the end of 2023 or in early 2024 and distributions will continue thereafter with a substantial proportion of the portfolio being realised within three to five years. The Board will regularly communicate the expected timing of distributions as the portfolio is realised.

3.2          Amendment to the Investment Management Agreement

The Investment Manager is expected to manage the orderly realisation process over time by seeking appropriate values for the underlying assets of the Company.

The Board believes that the continued appointment of the Investment Manager is important to achieving this aim. However, the current fee arrangements were not structured with management of an orderly realisation process in contemplation and, consequently the Board and the Investment Manager have agreed, subject to Independent Shareholders' approval, to restructure the Investment Manager's management and performance fee arrangements in light of the proposed change in strategy to align the interests of the Company, its Shareholders and the Investment Manager throughout the orderly realisation process.

The revised performance fee arrangements, which are set out in detail below and in Part 5 of this Circular, have the following key alignments:

1.   the Investment Manager shall not be entitled to receive any performance fee unless both the High Water Mark Condition and the Investment Hurdle Condition are met, each of which is defined below; and

2.   any performance fees will only then be paid to the Investment Manager concurrent, and on a pro rata basis, with amounts being distributed to Shareholders, with performance fees in effect being paid out of realised returns only.

The Board believes that these are material improvements over the existing arrangements in the context of a managed wind-down and in return an increased performance fee rate of 20% (compared with the current 15%) has been agreed.

The Investment Manager has entered into a side letter to the Investment Management Agreement dated 16 May 2023 (the "Side Letter"), pursuant to which the Investment Management Agreement will, conditional upon the passing of Resolution 2 to be proposed at the General Meeting, be amended as follows:

Management fee

It is proposed that, should Resolution 2 be approved, the management fee shall remain the same, being 1/12 of 1.0 per cent. Per month of the NAV, except that, once the NAV is reduced to less than £50 million the monthly management fee shall be subject to a minimum amount, therefore, the monthly management fee shall be the higher of 1/12 of 1.0 per cent. Per month of the NAV and:

•      for the first year (the first to 12^th month) following the NAV first being reduced to less than £50 million: 1/12 of £500,000 per month;

•      for the second year (the 13^th to 24^th month) following the NAV first being reduced to less than £50 million: 1/12 of £350,000 per month; and

•      for the third year (the 25^th to 36^th month) following the NAV first being reduced to less than £50 million: 1/12 of £200,000 per month.

For the fourth year and beyond (37^th month and beyond) following the NAV first being reduced to less than £50 million, the monthly management fee shall again be as it is currently (without any minimum amount requirement), which is 1/12 of 1.0 per cent. Per month of the NAV.

The interests of the Company and the Investment Manager are currently aligned under the existing management fee arrangements based on the existing investment objective and policy. However, in view of the proposed changes to the investment objective and policy, the management fee arrangements are proposed to be amended (as described above) to ensure that alignment is preserved. In particular, it is in the interest of the Company for the orderly realisation process to be conducted efficiently, which would necessarily involve a gradual decrease in the NAV as value is realised and distributed to Shareholders. In contrast, the existing management fee is directly linked to the NAV, which may incentivise the Investment Manager to delay realisations so as to preserve the NAV at least at a level below which the Investment Manager's costs would exceed the management fee it earns. It is therefore proposed that, upon the changes to the investment objective and policy coming into effect, the management fee should be subject to a minimum amount as described above, which seeks to take into account the Investment Manager's workload and the continuing alignment of interests at that time as the Company shrinks through returning capital. Furthermore, it is proposed that the minimum management fee arrangement would only be in place for a three-year period so as to help incentivise the Investment Manager to complete the orderly realisation process within a reasonable timeframe without undue delay, following which the fee will revert to 1/12 of 1.0 per cent. Per month of the NAV and cause an expected reduction in the amount of management fees paid to the Investment Manager.

Performance fee

It is proposed that the Investment Manager shall not be entitled to receive any performance fee unless both the High Water Mark Condition and the Investment Hurdle Condition are met.

Provided that the cumulative aggregate cash returned to Shareholders pursuant to one or more Distribution Event(s) totals an amount which is at least the High Water Mark NAV Amount of £317,614,783 (the "High Water Mark Condition"), upon each Distribution Event, the Investment Manager shall, subject to the Investment Hurdle Condition as set out below, be entitled to receive 20 per cent. Of the Excess being returned to Shareholders at that Distribution Event, provided that the Adjusted Net Asset Value as at the date of such Distribution Event exceeds the Adjusted Hurdle Value (the "Investment Hurdle Condition").

Set out in Part 4 of this Circular is a summary of the current management fee and performance fee arrangements under the existing Investment Management Agreement.

Set out in Part 5 of this Circular is a summary of the proposed changes to the management fee and performance fee arrangements under the Side Letter.

Just as the management fee is proposed to be amended to seek to align the interests of the Company and the Investment Manager, changes to the performance fee are also proposed. While it is in the interests of the Company for the orderly realisation process to be conducted efficiently, it is also crucial that this is balanced against the aim to maximise value. Accordingly, two aspects of the performance fee are proposed to be amended: (1) the point at which the performance fee crystallises; and (2) the requirements to be met before the Investment Manager is entitled to receive any performance fee.

The proposed change from annual crystallisation of any performance fee to performance fee payment points being linked to actual distributions to Shareholders seeks to align the interests of the Company and the Investment Manager, as it is intended that this proposed amendment would help incentivise the Investment Manager to return cash to Shareholders promptly, with performance fees only being paid upon actual returns of cash to Shareholders, as opposed to upon any unrealised gains. Furthermore, the proposed introduction of the High Water Mark Condition is intended to help incentivise the Investment Manager to maximise the value to be realised on the sale of the Company's investments and to ensure that the Company does not pay performance fees on future NAV growth on which a performance fee was paid to the Investment Manager in the past.

Related party transaction

Under the Listing Rules, the Investment Manager is deemed a related party of the Company and the proposed amendments to the Investment Management Agreement constitute a related party transaction requiring the approval of the Independent Shareholders before they may be implemented.

The Investment Manager has undertaken not to vote, and to take all reasonable steps to ensure that its associates do not vote, on Resolution 2. As at the Latest Practicable Date, the Investment Manager holds approximately 0.81 per cent of the Shares.

Acquisition Requirement

Separate to the above-mentioned related party transaction, the previously-existing requirement on the Investment Manager (provided that it would be lawful to do so and where Shares are trading at a discount to their prevailing NAV at any times during the five business day period beginning on the business day of the NAV announcement in respect of any month) to undertake to use reasonable endeavours to purchase Shares at such times during such five business day period in an amount equal to 1/12 of 0.2 per cent. Of the NAV as at the NAV Calculation Date in respect of that month ("Acquisition Requirement") has now been removed and this change came into effect as from 31 March 2023.

4              Return of capital

The Board will keep Shareholders informed of its intentions concerning returns of capital, mechanisms for which may include (as well as the payment of dividends) tender offers, other schemes for the return of capital and/or the buying back of Shares as the portfolio is realised. Throughout, the Board will follow the principle of seeking to balance the optimum scale and accompanying costs to the Company of the relevant method of return with the desire to accomplish that return as quickly as practicable, without eroding the value to be distributed.

Amounts becoming available for return will come from contractual repayments by borrowers to the Company and from the disposal of portfolio assets, potentially after the repayment and cancellation of some or all of the Company's bank facilities.

The Board currently expects to continue paying dividends at the current rate for at least a year and potentially longer. The Company intends to maintain its investment trust status during this managed realisation process prior to liquidation.

The Board also expects to propose that the Company enters into voluntary liquidation at a point when the realisations and returns of capital have caused the Company to become too small to justify the costs of retaining a listing for its Shares or otherwise at a point when the Board considers the Company's remaining portfolio would be likely to cease, in the near term future, to continue to provide a spread of investment risk that is reasonable in the circumstances.

5              Benefits of the Proposals

The Board believes that the Proposals offer the following significant benefits to Shareholders:

•      Commencing a managed realisation of assets, rather than placing the Company in liquidation immediately or seeking an immediate sale of the portfolio, is expected to enable the Company to maximise the value realised on the sale of its investments.

•      Maintaining the listing of the Company's Shares while the substantial majority of its assets are realised will, subject to market conditions, enable Shareholders and prospective investors to continue to be able to buy and sell the Company's Shares in this period before the Company then enters voluntary liquidation.

•      The realisation process will enable Shareholders to realise the value of their investment at a price over a period of time which should be closer to NAV than that which they may have received by trading their Shares prior to the date of this document given the discount to NAV per Share at which the Shares have traded.

•      The Investment Manager would be appropriately incentivised through the revised fee arrangements to maximise realisation proceeds throughout the entire disposal process in a timely manner consistent with a prompt return of cash to Shareholders. The revised fee proposal would thus be more appropriate for the amended investment objective and policy while also ensuring better alignment between Shareholders and the Investment Manager. Fixed management fees alone could not achieve this degree of alignment.

•      The revised fee arrangements would ensure a full NAV return (i.e., the High Water Mark NAV Amount) of cash to Shareholders before any performance fees are paid to the Investment Manager.

•      Further, Shareholders will not pay performance fees on unrealised gains in the future which ensures the Investment Manager is only paid from realisable and returned capital proceeds and mitigates against disposals at a discount to expedite an expected voluntary liquidation of the Company.

6              Risk Factors

As a result of the Proposals, Shareholders should be aware of the following risk factors:

•      There is no guarantee that the change to the Company's investment objective and policy will provide the returns or realise the capital sought by Shareholders. There can be no guarantee that the Company will achieve its new investment objective.

•      The market value and the NAV of the Shares may go down as well as up. The market value of the Shares at any particular time may vary significantly and not reflect the underlying NAV. Shareholders may not get paid the amount they originally invested on a sale of their Shares or on a liquidation of the Company.

•      Running costs of the Company, sales commissions, asset liquidation costs, taxes and other costs associated with the realisation of the Company's assets will reduce the cash available for any distribution to Shareholders. No assurance can be given that all cash received on future realisations of the Company's investments will be returned as capital.

•      As a result of the portfolio realisation, the number of investments held by the Company will reduce over time and, as a consequence, the aggregate return on the remaining portfolio will become increasingly exposed to the performance, favourable or unfavourable, of the remaining individual investments. This could have the effect of making performance more volatile.

•      The proposed change of investment objective and policy would result in the Company becoming reliant on the Investment Manager's ability to dispose of investments in order to realise capital for Shareholders.

•      At the point the Company enters into voluntary liquidation, it is likely to be uncertain how long it will take until full realisation is achieved and a final distribution can be made by the liquidator. On entering voluntary liquidation the Company will cease to maintain its listing and Shareholders should thereafter no longer expect to be able to buy and sell Shares through the London Stock Exchange. Information concerning the value of remaining assets held, the split between cash and assets remaining to be realised, and the timings and the likely amounts of distributions may become less frequently available following the appointment of a liquidator.

•      The Company's level of gearing may increase as a result, inter alia, of further draw downs to honour commitments to funds under existing contractual arrangements, revaluations of the portfolio or realisation of assets at less than their carrying value. An increased level of gearing would increase Shareholders' exposure to realisation values.

•      The passing of Resolution 1 (to amend the investment policy to facilitate a managed wind-down of the Company) is not conditional upon the passing of Resolution 2 (to amend the Investment Management Agreement). Therefore, should Resolution 1 be passed and should Resolution 2 fail to be passed, the result will be that the Company's investment policy will be amended (to facilitate its managed wind-down) and yet the current management fee and the performance fee arrangements will nonetheless continue to remain in place for so long as the Investment Manager remains appointed as the investment manager to the Company pursuant to the Investment Management Agreement. In such case, there is the risk that, under the current fee arrangements, the interests of the Shareholders may not be fully aligned to those of the Investment Manager. Should Resolution 2 fail to be passed at the General Meeting, the Board does not believe that further re-negotiations on the management fee or the performance fee with the Investment Manager in the future would be a realistic possibility. 

•      The passing of Resolution 2 (to amend the Investment Management Agreement) is conditional upon the passing of Resolution 1 (to amend the investment policy to facilitate a managed wind-down of the Company). Therefore, should Resolution 1 fail to be passed, Resolution 2 shall not be proposed, and the result will be that neither the Company's investment policy nor the current management fee and performance fee arrangements will be amended. Furthermore, given that the proposal to amend the investment policy to facilitate a managed wind-down of the Company represents a 100% exit opportunity the Board will not be putting forward a separate 25% Exit Opportunity.

•      There is no guarantee that the change to the Company's investment objective and policy will provide the returns or realise the capital sought by Shareholders. There can be no guarantee that the Company will achieve its new investment objective.

•      The market value and the NAV of the Shares may go down as well as up. The market value of the Shares at any particular time may vary significantly and not reflect the underlying NAV. Shareholders may not get paid the amount they originally invested on a sale of their Shares or on a liquidation of the Company.

•      Running costs of the Company, sales commissions, asset liquidation costs, taxes and other costs associated with the realisation of the Company's assets will reduce the cash available for any distribution to Shareholders. No assurance can be given that all cash received on future realisations of the Company's investments will be returned as capital.

•      As a result of the portfolio realisation, the number of investments held by the Company will reduce over time and, as a consequence, the aggregate return on the remaining portfolio will become increasingly exposed to the performance, favourable or unfavourable, of the remaining individual investments. This could have the effect of making performance more volatile.

•      The proposed change of investment objective and policy would result in the Company becoming reliant on the Investment Manager's ability to dispose of investments in order to realise capital for Shareholders.

•      At the point the Company enters into voluntary liquidation, it is likely to be uncertain how long it will take until full realisation is achieved and a final distribution can be made by the liquidator. On entering voluntary liquidation the Company will cease to maintain its listing and Shareholders should thereafter no longer expect to be able to buy and sell Shares through the London Stock Exchange. Information concerning the value of remaining assets held, the split between cash and assets remaining to be realised, and the timings and the likely amounts of distributions may become less frequently available following the appointment of a liquidator.

•      The Company's level of gearing may increase as a result, inter alia, of further draw downs to honour commitments to funds under existing contractual arrangements, revaluations of the portfolio or realisation of assets at less than their carrying value. An increased level of gearing would increase Shareholders' exposure to realisation values.

•      The passing of Resolution 1 (to amend the investment policy to facilitate a managed wind-down of the Company) is not conditional upon the passing of Resolution 2 (to amend the Investment Management Agreement). Therefore, should Resolution 1 be passed and should Resolution 2 fail to be passed, the result will be that the Company's investment policy will be amended (to facilitate its managed wind-down) and yet the current management fee and the performance fee arrangements will nonetheless continue to remain in place for so long as the Investment Manager remains appointed as the investment manager to the Company pursuant to the Investment Management Agreement. In such case, there is the risk that, under the current fee arrangements, the interests of the Shareholders may not be fully aligned to those of the Investment Manager. Should Resolution 2 fail to be passed at the General Meeting, the Board does not believe that further re-negotiations on the management fee or the performance fee with the Investment Manager in the future would be a realistic possibility. 

•      The passing of Resolution 2 (to amend the Investment Management Agreement) is conditional upon the passing of Resolution 1 (to amend the investment policy to facilitate a managed wind-down of the Company). Therefore, should Resolution 1 fail to be passed, Resolution 2 shall not be proposed, and the result will be that neither the Company's investment policy nor the current management fee and performance fee arrangements will be amended. Furthermore, given that the proposal to amend the investment policy to facilitate a managed wind-down of the Company represents a 100% exit opportunity the Board will not be putting forward a separate 25% Exit Opportunity.

7              General Meeting

The Proposals require the approval by Shareholders at the General Meeting which has been convened for 2.00 p.m. on 12 June 2023.

The Resolutions will be proposed as ordinary resolutions. An ordinary resolution requires a majority of members entitled to vote and present in person or by proxy to vote in favour in order for it to be passed.

Resolution 2 is conditional upon the passing of Resolution 1. Therefore, if Resolution 1 fails to be passed, Resolution 2 will not be proposed.

If Resolution 2 fails to be passed, the current management fee and the performance fee arrangements will remain on their existing terms as set out in the Investment Management Agreement, for so long as the Investment Manager remains appointed as the investment manager to the Company pursuant to the Investment Management Agreement.

In accordance with the Articles, all Shareholders present in person or by proxy shall upon a show of hands have one vote and upon a poll shall have one vote in respect of each Share held. In order to ensure that a quorum is present at the General Meeting, it is necessary for two Shareholders entitled to vote to be present, whether in person or by proxy (or, if a corporation, by a representative).

The formal notice convening the General Meeting is set out at the end of this Circular.

9              Recommendation

The Board considers that the Proposals are in the best interests of the Company and its Shareholders as a whole.

In the opinion of the Board the proposed amendments to the Investment Management Agreement are fair and reasonable as far as Shareholders are concerned and the Directors have been so advised by Winterflood Securities Limited (acting in its capacity as sponsor to the Company). In providing its advice to the Board Winterflood Securities Limited has taken into account the Board's commercial assessment of the Proposals.

Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting.

The Directors intend to vote in favour, or procure the vote in favour, of the Resolutions at the General Meeting in respect of their own beneficial holdings of Shares which, in aggregate, amount to 718,240 Shares representing approximately 0.2 per cent. of the Company's issued Share capital (excluding Shares held in treasury).