TwentyFour Income Fund - Publication of Prospectus
PR Newswire
London, March 3
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA, ANY MEMBER STATE OF THE EEA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
This announcement is an advertisement and not a prospectus for the purposes of the Prospectus Regulation Rules of the Financial Conduct Authority ("FCA") or otherwise. Investors should not subscribe for or purchase any securities referred to in this announcement except solely on the basis of the information contained in the prospectus of TwentyFour Income Fund Limited (together with any supplementary prospectus, if relevant) including the risk factors set out therein. A copy of the prospectus will be available for inspection at TwentyFour Income Fund Limited's registered office and website at www.twentyfourincomefund.com (subject to certain access restrictions) and at the National Storage Mechanism via https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
3 March 2022
TwentyFour Income Fund Limited
(TFIF or the "Company")
PUBLICATION OF PROSPECTUS
Further to the announcement on 8 February 2022 in relation to the proposed merger of TFIF and UK Mortgages Limited ("UKML"), the Company announces that it has published a prospectus (the "Prospectus") which was approved by the FCA earlier today.
The merger will be effected by way of a scheme of reconstruction of UKML, consisting of the winding-up of UKML, the transfer of UKML's assets to the Company and the issue of ordinary shares by TFIF to UKML's shareholders (the "Scheme").
UKML has also today published a circular to its shareholders in respect of the Scheme.
The TFIF Board considers the Scheme to be in the best interest of TFIF and its shareholders as a whole. The TFIF Board has consulted extensively with its shareholders and there has been overwhelming support for the transaction. In addition, the TFIF Board understands that UKML shareholders have indicated overwhelming support for the transaction.
The TFIF Board believes that the Scheme has compelling strategic, operational, and financial rationale, which includes the following:
| Creating a market leading listed credit fund | · The Company should benefit from a strengthened market position due to greater scale and combined asset management and securitisation expertise within TwentyFour Asset Management LLP ("TwentyFour"). · Following implementation of the Scheme, the Company's NAV is expected to be approximately £715 million1. · 11 investment professionals of TwentyFour will be focussed on the Company. |
| Combining complementary portfolios with attractive characteristics | · The Company's evolving strategy seeks the yield premium from lower liquidity, recognising that sourcing attractive risk-adjusted returns has become more challenging. · The merger provides access to UKML's stable income-generating assets, previously underwritten by TwentyFour, consistent with the Company's investment approach. · The merger is expected to diversify the sources of income for the Company. |
| Enhanced return profile | · Earnings from the combined portfolios of UKML and the Company are expected to be a strong underpin to the Company's annual Dividend Target of at least 6 pence per Ordinary Share2. The estimated gross-to-market yield of the combined portfolio is approximately 8.3 per cent3. · The merger is expected to be NAV accretive to the Company over the medium term. |
| Access to high qualitycounterparties | · Following the merger, the Company will be well placed to capitalise on UKML's existing counterparty relationships across the asset-backed securities market. |
| Increased liquidity with a more diverse Shareholder register | · Increased liquidity of the Ordinary Shares is expected in the secondary market given the Company's greater scale and anticipated increased weighting in the FTSE indices. · The Company will achieve a high quality and more diverse Shareholder register with scope to appeal to a broader universe of potential investors. |
| Synergies expected to create value for Shareholders | · Cost efficiencies and economies of scale are expected as a result of the merger. · The Company is expected to maintain an attractive ongoing charges ratio over time. Following implementation of the Scheme, the Company's cost ratio is expected to be approximately 1 per cent4. |
Update on the proposed terms of the acquisition
Both the Directors of TFIF and the directors of UKML believe that the proposed Scheme remains attractive, despite the change to the global economic environment caused by Russia's invasion of Ukraine. In order to provide enhanced certainty for both the Company and UKML of transaction terms against current uncertainty and potential volatility, the proposed terms of the Scheme announced on 8 February 2022 have been amended to substantively fix the price per UKML Ordinary Share at which the Company will acquire the assets of UKML and the price at which Ordinary Shares will be issued in consideration for those assets as at 31 January 2022.
Under the Scheme, the Company will acquire the assets of UKML at a price per UKML Ordinary Share of 84 pence, less UKML's costs in relation to the Scheme and the retention to meet unknown and ascertained liabilities, subject to certain adjustments in accordance with the terms of the Scheme. Based on the most recent estimate of UKML's costs in relation to the proposed Scheme and the expected retention, the illustrative acquisition value per UKML Ordinary Share is estimated at 83.32 pence per UKML Ordinary Share. The acquisition price will be satisfied through the issue to UKML's shareholders of Ordinary Shares at a price representing a 1.25 per cent. premium to the Company's net asset value as at 31 January 2022 (the "FAV").
The FAV is 114.21 pence per Ordinary Share, being the NAV per Ordinary Share of 112.80 pence as at 31 January 2022, plus the agreed 1.25 per cent. issuance premium. Assuming the acquisition value per UKML Ordinary Share remains at 83.32 pence per UKML Ordinary Share (which is subject to rounding and adjustment for any additional net assets or net liabilities of UKML ascertained between now and the Effective Date for the Scheme), a UKML shareholder will receive 0.7296 Ordinary Shares for each UKML Ordinary Share held and the number of Ordinary Shares to be issued to UKML shareholders will be 130.4 million.
Commenting on the Scheme, Trevor Ash, Chairman of TFIF said:
"The Scheme will result in TwentyFour Income Fund enhancing its status as a market leading listed credit fund that will benefit from cost efficiencies and increased secondary market liquidity. The Board, having been through extensive scrutiny of the transaction, believe that the opportunity to acquire UKML's assets is in the best interests of TFIF. UKML's assets offer a rare opportunity to acquire highly attractive risk-adjusted assets that will enhance both the income and NAV of the portfolio over the medium term."
Timetable
Subject to satisfaction or waiver of the conditions to the Scheme, the expected timetable is as follows:
| 17 March 2022 | UKML Record Date for entitlements under the Scheme |
| 18 March 2022 | UKML EGM |
| 18 March 2022 | Scheme Effective Date |
| 18 March 2022 | Calculation Date |
| 24 March 2022 | Admission to listing of new Ordinary Shares |
| 24 March 2022 | Transfer of assets from UKML to the Company |
Conditions to the Scheme
The Scheme is conditional on (inter alia): (a) the approval of UKML's shareholders at an extraordinary general meeting convened to consider the Scheme; (b) Admission of the Ordinary Shares to the premium segment of the Official List of the FCA and to trading on the premium segment of the London Stock Exchange's main market; (c) a reorganisation of the entity that holds UKML's assets; (d) there not having been any material adverse change affecting UKML prior to the Effective Date; and (e) UKML being in compliance with its undertaking not to take any action or omit to take any action that would cause a reduction in its NAV, other than in the ordinary course of its business.
Placing Programme
The Company also announces a 12 month Placing Programme of up to 150 million Ordinary Shares. Funds raised under the Placing Programme will be invested in accordance with the Company's investment policy.
Realisation Opportunity
The Company's Articles provide for a three yearly Realisation Opportunity under which Shareholders may elect to realise all or part of their holdings of Ordinary Shares. The next Realisation Opportunity will occur in October 2022 with the Reorganisation Date falling 5 Business Days after the 2022 AGM.
Shareholders will have the option to either:
· retain their current investment in the Company; or
· realise their investment in the Company, by making a Realisation Election, which are intended to be satisfied at the Redemption Price representing a 2 per cent. discount to NAV per Ordinary Share as at the Electing NAV Determination Date.
Further details on the Realisation Opportunity will be provided to shareholders in due course.
Enquiries:
TFIF
Trevor Ash, Chairman
Via Numis
Numis, Financial Adviser and Corporate Broker to TFIF
Hugh Jonathan / Matt Goss
Tel: 020 7260 1000
Northern Trust International Fund Administration Services (Guernsey) Limited
Company Secretary
Tel: 01481 745001
Notes:
(1) This figure is provided for illustrative purposes only, on the basis that the calculation date of the Scheme had been fixed at 31/01/2022 and does not represent a forecast.
(2) This is a target only and not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions at all. This target return should not be taken as an indication of the Company's expected or actual current or future results. The Company's actual return will depend upon a number of factors, including but not limited to the size of its portfolio and the Company's total expense ratio.
(3) This figure is indicative and based on TwentyFour modelling.
(4) Combined cost ratio indicative and based on TwentyFour modelling.
IMPORTANT INFORMATION
Nothing in this announcement shall form the basis of or constitute any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor.
None of TFIF's or UKML's shareholders or prospective investors in either company, should base any financial decision on this announcement. Acquiring investments to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making investments should consult an authorised person specialising in advising on such investments. This announcement does not constitute a recommendation concerning shares in either TFIF or UKML. The value of shares can decrease as well as increase.
Nothing contained herein constitutes or should be construed as (i) investment, tax, financial, accounting or legal advice (ii) a representation that any investment or strategy is suitable or appropriate to individual circumstances or (iii) a personal recommendation.
Numis Securities Limited ("Numis"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority ("FCA"), is acting for TFIF and UKML and for no one else in connection with the Scheme and will not regard any other person as its client and will not be responsible to anyone other than TFIF or UKML for providing the protections afforded to clients of Numis or for advising any such person in connection with the contents of this announcement or the Scheme.
This announcement does not constitute an offer or solicitation to acquire or sell any securities in either of TFIF or UKML. This announcement is not for distribution in or into the United States or to any US Person, Australia, Canada, Japan, New Zealand, the Republic of South Africa, any European Economic Area state or any other jurisdiction in which its distribution may be unlawful. A "US Person" is any person who is not a "Non-United States Person" as defined in US Commodity Futures Trading Commission Rule 4.7. This announcement is not an offer of securities for sale in the United States or elsewhere. The securities of TFIF and UKML have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States unless registered under the Securities Act or pursuant to an exemption from such registration. Neither TFIF or UKML has been and will be registered under the US Investment Company Act of 1940, as amended, and investors are not entitled to the benefits of that Act. There has not been and there will be no public offering of the either TFIF or UKML's securities in the United States.
Forward looking statements
The information contained in this announcement contains certain 'forward-looking statements' with respect to TFIF and UKML's expectations relating to the future financial condition, performance, results, strategy and objectives of TFIF following the implementation of the Scheme. For example, statements containing words such as 'may', 'will', 'should', 'continue', 'aims', 'estimates', 'projects', 'believes', 'intends', 'expects', 'plans', 'pursues', 'seeks', 'targets' and 'anticipates', and words of similar meaning or the negative thereof, may be forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they are based on information available at the time they are made, including current expectations and assumptions, and relate to future events and circumstances which may be or are beyond TFIF's or UKML's control, including among other things statements relating to the expected benefits of the proposed Scheme.
TFIF's actual future financial condition, performance and results may differ materially from the plans, goals, strategy and expectations set forth in the forward-looking statements and undue reliance should not be placed on forward-looking statements. Except to the extent otherwise required by applicable law, none of TFIF, UKML or TwentyFour are under any obligation to update any of the forward-looking statements contained in this announcement or any other forward-looking statements they may respectively make. Past performance is not an indicator of future results and unless expressly stated otherwise, no statement contained or referred to in this announcement is intended to be a profit forecast, estimate or projection of TFIF's future results.
Any shareholder action required in connection with the proposed Scheme will only be set out in documents sent to or made available to UKML's shareholders and any decision made by such shareholders should be made solely and only on the basis of information provided in those documents.
Information to Distributors
Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of the Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; (c) local implementing measures; and/or (d) (where applicable to UK investors or UK firms) the relevant provisions of the UK MiFID Laws (including the FCA's Product Intervention and Governance Sourcebook (PROD) (together the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Shares have been subject to a product approval process, which has determined that such Shares are: (i) compatible with an end target market of professionally advised retail investors who do not need a guaranteed income or capital protection, who (in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II or the UK MiFID Laws (as applicable) and who do not need a guaranteed income or capital protection; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II or the UK MiFID Laws, as applicable (the "Target Market Assessment").
Any person subsequently offering, selling or recommending the securities (a "distributor") should take into consideration the manufacturer's target market assessment; however, a distributor subject to the UK MiFID Laws or MiFID II (as applicable) is responsible for undertaking its own target market assessment in respect of the Shares (by either adopting or refining the manufacturer's Target Market Assessment) and determining appropriate distribution channels.
